Non-profit organizations have a large role to play in general societal functioning. While typical business conceptualizations are based on identifying a market need, an inherent profit motive does not allow for fulfilling larger societal responsibilities. This is where a non-profit comes in. By focusing from the ground up on actual social needs, they can have a positive impact on a local community!
However, the success of a non-profit depends on its financial transparency. This is a donor-run organization. That means – donors want to know exactly how their funds are utilized. Failing to show quality usage, or frivolous usage of funding can lead to funds drying up. Consequently, such a non-profit will fail to have a larger impact on the community.
According to a renowned accountant in Reston, VA, the most critical error non-profits make is not recognizing the need for professional bookkeeping. Here’s how professional bookkeeping can help.
Conduct Annual Audits
Annual audits are a critical component of financial oversight for non-profit organizations. They provide an independent review of financial records, ensuring accuracy and compliance with accounting standards. Professional bookkeeping services facilitate these audits by maintaining detailed and organized financial records throughout the year. An audit not only verifies the integrity of an organization’s financial statements but also enhances credibility with donors, grant-makers, and stakeholders.
Prepare Quarterly and Annual Financial Statements
Accurate financial statements are essential for assessing an organization’s financial health and making informed decisions. Non-profits need to prepare quarterly and annual financial statements, including the statement of activities, statement of financial position, and statement of cash flows. Professional bookkeepers ensure these statements are prepared accurately and reflect the organization’s financial performance. These documents provide valuable insights into revenue streams, expenses, and overall financial stability.
Prepare Reviewed or Compiled Financial Statements
In addition to audited financial statements, non-profits may require reviewed or compiled financial statements, depending on their size and funding sources. Reviewed statements involve a CPA’s analysis of financial data, while compiled statements are prepared using the organization’s financial records. Professional bookkeeping services can prepare these statements accurately, ensuring they meet the requirements of funding agencies and regulatory bodies.
Prepare Supporting Documents
Comprehensive financial documentation is essential for non-profit organizations to demonstrate their financial activities and accountability. Professional bookkeeping services prepare supporting documents such as income statements, program and functional expense reports, balance sheets, and revenue support schedules. These documents provide a detailed overview of the organization’s financial operations, helping stakeholders understand how funds are allocated and spent.
Comply with State Laws Affecting Non-Profits
Non-profit organizations must comply with various state laws and regulations governing their operations. Professional bookkeeping services ensure that non-profits adhere to these legal requirements by maintaining accurate financial records and providing timely reports. Compliance with state laws is essential for maintaining tax-exempt status, avoiding penalties, and ensuring the organization’s long-term sustainability.
Submit Annual Forms 990 and 990-T
Non-profit organizations are required to file annual tax forms with the IRS, including Form 990 and, if applicable, Form 990-T for unrelated business income. These forms provide detailed information about the organization’s finances, governance, and programs. Professional bookkeeping services assist in preparing and submitting these forms accurately and on time. Filing these forms is not only a legal obligation but also an opportunity for non-profits to showcase their transparency and accountability.
A non-profit that recognizes the worth of professional bookkeeping is a non-profit that has an impact. As such, it’s best to reach out to a local financial expert – such as a CPA – to help in this process. These experts can provide the consultation and services necessary for a financially healthy start-up!
