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Nonprofit Accounting Best Practices

Nonprofit professionals have a variety of talents but for some, financial matters might not be their favorite. However, there is no quicker way for your nonprofit organization to get into trouble with your donors and the IRS than to have poor money management procedures.

Having a financial expert is important, but, before we go there, let’s make sure we’re on the same page. What’s the difference between a bookkeeper, an accountant, and a treasurer?

· Bookkeeping is a transactional, administrative job. Bookkeepers handle the day-to-day tasks such as journal entries and paying invoices.

· Accountants are analytical. They prepare financial statements, tax returns, cash flow forecasts, audits, and other reports based on the information provided by the bookkeeper.

· The treasurer is a member of the board of directors and takes the lead in setting financial policies.

You need all skill sets. Each role is unique and equally important.

It is also equally important to have written financial policies and procedures in place that align with GAAP (, (Generally Accepted Accounting Principles). These policies should be approved by the board and understood by the staff.

Everyone involved with the inflow and outflow of an organization’s funds should understand and comply with your documented checks and balances. For example, the staffer who receives the donations, whether by postal mail or internet, should not be the one who makes the entry into QuickBooks.

Here are some tips to help you and your organization establish best practices:

· Have a detailed, written and approved annual budget.

o Monitor program budgets and keep them up to date.

o Present updated monthly financial reports to your board of directors.

· Have written financial policies and procedures in place that were voted on and approved by the board.

o Understand Generally Accepted Accounting Principles (GAAP).

o Have checks and balances in place. You shouldn’t have one person handling all financial duties.

· Use appropriate financial professionals, whether it’s a bookkeeper, accountant or CPA based on the size of your organization, and not just your volunteer treasurer.

· Use accounting software and donor database software.

The purpose of these recommendations is to help your organization be transparent with your donors and to be in compliance with your state’s regulations and with the IRS. It’s worth the investment so that you can do your real work, serve your clients.


Michelle Crim, CFRE

Dynamic Development Strategies can help. We offer coaching and fundraising services for our nonprofit clients. We specialize in startup and smaller nonprofits because we understand your challenges. Please contact us for more information.

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