About Non Profit Accounting
Running a company, a normal profit stream, and dreams of effecting change in the world requires a deft accounting hand in order to accomplish these goals. In addition to all of the basic fund management skills that every accountant needs, an accountant for a non-profit has to be prepared with extra knowledge and a few tricks in order to keep the finances running smoothly.
Non-Profit IRS Basics
The largest difference between for-profit and non-profit accounting is the amount of detail required to be submitted to the IRS in order to maintain tax-exempt status. Failing to file annually can result in fines or loss of tax-exempt status.
The 990-series of forms are the ones that non-profit accountants will need to become familiar with on top of normal tax filing paperwork. The beginning form depends on the amount of the gross receipts (total income) for the year, the value of total held assets, and whether the organization is a private foundation. These starting forms include the 990, 990-EZ, 990-PF, and 990-N. From there, additional forms may be suggested based on answers to questions about the non-profit’s expenditures in areas such as politics or outside of the country.
Be Prepared for Inconsistent and Disparate Fund Income
Non-profits receive their funding primarily through donations, fundraising, and grants. While some revenue will be consistent, much of it will vary with the capability of people to give their hard-earned dollars to the company without unbalancing their own checkbook. This leaves it up to the accountant to preserve funds from the times of plenty to cover possible gaps in the future while still allowing room for expansion in the non-profit’s efforts as possible.
Not everyone gives directly through cash, either, and the accountant will need to know how to list donations of time, services, and goods on tax forms. Consult Powers & Associates PPLC , one of the top Nashville, Tennessee accounting firms, since 1982.
Look for Expansions to the Revenue Stream
“Make more money” might seem like an obvious goal, but a non-profit needs to look for funds as much as possible. Government agencies and other organizations offer grants and contracts to non-profits who can demonstrate both a need for the grant and the capability to make use of it. Supplying a detailed account of the return on current funds compared with the possibilities if the grant is given can increase the probability of receiving the grant.
Fundraising efforts should include both the local geographical area and portions of the web with related concerns. Approaching people and businesses in person gives them a connection to the non-profit that can encourage a lasting relationship that is replete with donations. Promoting the non-profit’s efforts online just through freely available channels like social media can expand the number of potential donation sources exponentially.
Have the Fortitude to Say “No”
A non-profit may do great work that saves people’s lives, improves the environment, or advances science, but there is a limit to how much can be done with the available cash flow. When the accounting staff is working the non-profit’s decision makers, it is up to the number-crunchers to provide a realistic depiction of the company’s capabilities. If a project just might be possible but depends on a good year of donations, then their duty is to push back allocating any funds to it until it becomes feasible. This can be difficult when the project may be something such as medicine for children or rescuing shelter animals scheduled for euthanization, so be prepared for the hardship of turning down requests for funds accompanied by heartfelt tears and pleas.