A nonprofit is an entity that ostensibly exists for charitable purposes. In other words, it’s a not-for-profit company. There are many of these companies, and they do great work all around the world. Nonprofits need accounting services, just like any other business. In fact, you could say that they need them even more urgently than some other kinds of entities. The IRS always monitors nonprofit accounting with the utmost care to make sure they are not defrauding their contributors.
Let’s talk about the basics of nonprofit accounting right now.
Many nonprofits use things like cloud ERP solutions when it comes to conducting their day-to-day activities. These usually take the form of software suites that have various functionalities. Many nonprofits pay a company that provides such a software suite.
Most of them are subscription services, sometimes referred to as SaaS, or software as a service. These work well for nonprofits because the accountants do not have to update the software themselves. The company that provides it takes care of that for them.
Nonprofits are run a little differently than for-profit companies. Because of this, it makes sense that there are individuals who receive training specifically in the area of nonprofits.
These accountants keep track of what money comes into the company and who is donating it.
They are not in charge of things like fundraising or promoting the nonprofit’s visibility, but they keep close track of how the money is brought in and how it’s used. They have to do this because there are always governing entities that have an eye on nonprofits to make sure they’re behaving appropriately.
There are usually boards of directors that monitor the funds that stream into nonprofits. They work closely with the nonprofit’s accountant. They channel information to the accountant about where the money is coming from and how they’re using it.
The accountant then prepares reports that must be submitted to the IRS. The IRS has special rules for how a nonprofit should be run that don’t apply to for-profit entities or private citizens.
Accountants for nonprofits must act as intermediaries between the IRS and the board of directors. If they botch any aspect of the nonprofit’s accounting, the IRS will quickly descend on the nonprofit looking for answers and can shut it down if there are any major financial discrepancies.
Because nonprofits don’t handle money and do things with it that are quite the same as for-profit companies or private citizens, it’s imperative that accountants working for nonprofits stay up to date on what this niche requires. If there are any changes to how nonprofits operate, it’s up to the accountant to let the nonprofit know that so they can stay in full compliance.
Any nonprofit that wants to be successful and make a positive difference in the world needs excellent accounting. Skilled individuals in this niche are what make that happen.
