How Accounting and Bookkeeping Practices Can Support Your Nonprofit’s Mission and Success

For nonprofit and for-profit organizations alike, following Generally Accepted Accounting Principles has the potential to become an “automatic” process. Blindly following the guidelines for the sake of compliance, while important, may lead to the false belief that doing so serves no other purpose. In the nonprofit sector, however, accurate accounting and bookkeeping practices go beyond maintaining compliant reports and filings that maintain your tax-exempt status. While we always encourage best practices, I’m sharing a few ways that implementing and following appropriate accounting and bookkeeping practices can also support your nonprofit’s mission and overall success.

Support Your Mission & Success Internally

As a nonprofit, your Board of Directors has been tasked with upholding your organization’s success in a number of ways; namely, they are responsible for maintaining your business strategy, reaching your financial goals, and staying true to your mission. To make solid decisions that effectively move your organization in a healthy, sustainable direction, your board is relying on current, accurate, and relevant data, which can only be generated by using appropriate accounting and bookkeeping practices.  

Accurately recording and reporting on budget vs. actual will help your board gain a clear understanding of the status of your organization’s finances and can illuminate the reasoning for any unexpected variances that may exist in your financial data. Bookkeeping surrounding profit & loss also plays an important role in helping your board understand things like profit associated with various programs or events and how best to meet your organization’s upcoming spending and fundraising needs. 

For tracking things that appear less “black and white,” seek professional advice. In order for willing businesses or foundations to match subsidiary or employee contributions with grants, for example, donations must be meticulously tracked. In-kind donations must also be accounted for carefully. These are the non-cash gifts, and not just tangible property, that can include services, expertise, and intellectual property. When your resources are properly accounted for, in-kind donations may free up your cash flow, allowing you to grow operations and ramp up your community impact in potentially ground-breaking ways.  

Support Your Mission & Success Publicly

Internal accounting, bookkeeping and record keeping practices and processes also yield the operational and financial information disclosed publicly through external deliverables, such as financial statements, tax returns, and annual reports. When these deliverables demonstrate your organization’s dedication to your stated charitable purpose and show an appropriate use of resources and assets, they provide your organization with powerful marketing tools.  

As a nonprofit, you have to remain accountable to those providing your funding and to supporters of your organization. These businesses and individuals want to know where their contributions are going and how they are being used. Your organization’s accounting and bookkeeping practices will back the data published to communicate certain information to the public, such as information on assets, liabilities, program funding, investing activities, and funds used for maintaining staff and operations.

The same accounting and bookkeeping data will be depended upon when filing your organization’s tax returns. As Federal Form 990 is available to the public, it is frequently reviewed by donors prior to making contributions. Donors and prospective donors can see if the organization truly uses gifts to impact their stated mission, program services can be analyzed for funding efficiency, and gross income details are shown on your organization’s investments, inventory sales, and fundraising events. 

Form 990 provides your organization with a public platform to highlight your mission, your brand, your funding details, major program activities, your successes, awards, and accomplishments, which makes it a powerful marketing tool. Many nonprofits also publish annual reports to get detailed information in the hands of the public, but do not underestimate the power behind your general accounting and bookkeeping practices in demonstrating your organization’s value to the community.

Supporting Your Mission and Success with Livingston & Haynes

My team at L&H are nonprofit industry leaders and we are here to serve organizations like yours. Our clients rely on our knowledge, transparency, and accuracy in providing accounting, auditing, tax, advisory, and bookkeeping services. I want to help your organization find accounting and bookkeeping practices best-suited to your needs, keep accurate financial records, and provide compliant deliverables that demonstrate your dedication to your mission to your board, supporters, and donors, as well as to your community and the general public. Contact me today to get started. 

Wendi Haynes,CPA is highly experienced in performing audits and reviews of not-for-profit organizations. In 2019, Wendi completed the requirements of the AICPA to be a peer reviewer. She serves as Livingston & Hayne’s Managing Partner and has been with the firm for over 30 years.