To ensure transparency, build trust with donors, and support better decision-making, your nonprofit needs a consistent month-end accounting process. If your organization wants to be audit-ready year-round, this checklist can help you stay organized and avoid last-minute scrambles.
Nonprofit Accounting Checklist
Follow these simple steps every month to keep your financial records in tip-top shape.
1. Close the Books on Time
Start by setting a clear timeline for your month-end close. For many mid-sized organizations, a deadline of 10 days after month-end is reasonable, but this may vary depending on your financial activities.
Make sure all transactions for the month are recorded before closing. This includes:
Accounts payable (bill payments, expenses)
Accounts receivable (pledges, grants, other income)
Payroll entries
Credit card activity
A clean cutoff ensures that all transactions are allocated to the correct fiscal period.
2. Reconcile Bank Accounts and Credit Card Accounts
Reconciling bank and credit card accounts is non-negotiable! Compare your accounting records to the statements issued by your bank and credit card providers. If there are any discrepancies, now is the time to resolve them.
Look for:
Missing transactions or checks that haven’t cleared
Duplicate entries
Bank fees or interest not yet recorded
Document your reconciliations clearly. Auditors often review these as a first step, and well-prepared reconciliations signal strong internal controls.
3. Review Restricted and Unrestricted Funds
Nonprofits are obligated to keep track of restricted funds, to ensure compliance with donor intent and GAAP. Temporarily restricted funds may be released (i.e., shifted from restricted to unrestricted) if/when certain conditions are met.
Review your revenue and expenses at the end of the month:
Are all funds properly categorized?
Are restricted funds being used according to donor intent?
Have any restrictions been released?
Misclassifying funds is a common audit finding, so this step is particularly important if you intend to undergo an audit.
4. Reconcile Grant and Program Balances
For organizations that rely on grants, this step is critical. Compare your internal accounting records to your grant agreements to make sure everything is in alignment and properly documented.
As you review grant-related documentation, make sure:
All revenue is recognized correctly (especially for conditional grants)
Expenses align with grant budgets
Remaining balances are accurate
By reviewing your grants on a monthly basis, you’ll avoid major clean-up work later on.
5. Review Accounts Receivable and Accounts Payable
Take a close look at outstanding balances for incoming and outgoing funds:
Follow up on overdue pledges or invoices
Write off bad debt or uncollectible accounts
Ensure all vendor invoices are recorded
Identify any past due bills
This helps maintain cash flow visibility and ensures that your organization’s liabilities are accurately reported.
6. Record Adjusting Journal Entries
This is the time to make any adjustments that can’t otherwise be documented within your day-to-day transactions.
Common month-end adjusting journal entries include:
Accrued expenses
Prepaid expenses
Depreciation
Deferred revenue
Take great care with journal entries! Clearly document the reasoning behind each entry, and leave a clear audit trail to avoid any confusion.
7. Review Financial Statements
Once all of your monthly entries are posted, it’s time to generate your core reports. For most nonprofits, this will include:
Statement of Financial Position (balance sheet)
Statement of Activities (income statement)
Budget vs. actual reports
Some organizations may prepare additional reports to help with financial decision-making. Once these reports are prepared, review them closely to look for any unusual fluctuations or variances from your budget. If something doesn’t make sense, investigate it now.
8. Organize Documentation
Whether you’re planning a remote or on-site audit, you will need to make sure all documentation is organized and easily accessible. Your auditors may request:
Invoices and receipts
Grant agreements
Bank statements
Payroll reports
Keep everything labeled and easy to retrieve. For electronic storage, use consistent file naming conventions to keep digital files in order.
9. Review Internal Controls
The end of the month is a good time to review your internal controls and update them if anything has changed. For example, if an employee leaves, you may need to temporarily or permanently reallocate their duties.
To ensure good internal controls, confirm that:
Duties are properly segregated (no one person handles everything)
Approvals are clearly documented
Policies are written down – and being followed!
Strong internal controls not only reduce risk, but also make your audit smoother.
10. Communicate with Leadership
Finally, share key financial insights with your leadership team. This might include:
Budget performance
Cash position
Upcoming financial risks or needs
Clear communication keeps everyone on the same page and helps your organization make informed decisions.
Final Thoughts
When done consistently, your month-end accounting process will reduce errors, improve transparency, and make audit preparation much easier. Start with a simple version of this checklist and refine it over time to help build a reliable process your team can follow every month. When audit season arrives, you’ll be glad you put in the effort!
