It can take all of your extra time and energy to run a nonprofit organization. The time is usually well worth it to those running the nonprofit because they find it so rewarding. While this work can be fulfilling, that doesn’t mean that bookkeeping and accounting is always cut and dry. There are complexities that can cause you a headache if you aren’t careful. Propel Your Accounting is here to talk about some of the top accounting mistakes that nonprofits should avoid making.
Dangers to Nonprofits When Accounting Mistakes are Made
The last thing anyone wants is to have their 501c3 status jeopardized. This is exactly what can happen when you make some critical mistakes in your accounting. Here are some of the most common mistakes that nonprofits make when it comes to accounting and bookkeeping.
– Separate Expenses: There are administrative costs or fundraising costs that should be kept obviously and purposefully separate from program costs. Mixing the two of them together can prove to be disastrous. You need to be able to clearly show where donations are used and have a robust cost allocation place in place.
– Strong Internal Controls: If you are looking, there are ways to strengthen your internal controls so that you have the right checks and balances in place. This might mean that you have implemented things like dual signatures for payments of any kind, bank account access that is restricted, and even regular reconciliations.
– Frequent Bank Reconciliations: It isn’t uncommon for nonprofits to avoid bank reconciliations. However, it is important that these take place on a regular schedule. It is best done on a monthly basis. That way, should there be any small mistakes that need to be fixed, they don’t have the opportunity to snowball into larger problems down the road.
– Preparing for Audit: Sometimes audits are legally required, but not always. Even if they aren’t required, nonprofit organizations will do well to prepare for them anyway. This will help you keep your bookkeeping mor organized. If there are any weaknesses that need to be dealt with, it will bring them to the forefront. It is also a way to keep your donors and grantors accountable.
– Financial Reports: The financial reports that you provide your stakeholders should be clean and organized. This way, you can clearly show that the funds are making an impact. There are often funder requirements and board expectations that should be acknowledged. These reports should be tailored to fit your specific mission and the impact that it is having.
Bookkeeping, Accounting, Business Consulting & HR / Admin Services in the United States of America
If you are a nonprofit, it is a good idea to turn to Propel Your Accounting to help you avoid making these accounting mistakes that could jeopardize everything. At Propel Your Accounting, we want to help you achieve the goals that you have for your nonprofit organization and take great pride in contributing. Call us today!
