Do's and Don'ts of Nonprofit Bookkeeping

When you’re running a nonprofit organization, you’re often juggling many different responsibilities in pursuit of your mission. Basic bookkeeping might be the least exciting task on your plate, but it’s also one of the most important. Here are several things you can do (or not do!) to help save time and keep your records accurate.


Don’t Procrastinate

When you have a hundred other things to accomplish, it can be tempting to put off your daily bookkeeping entries. Allocating a bunch of credit card expenses might seem like a low priority compared to landing a big grant or planning your annual benefit auction. But a slow trickle of neglected tasks can quickly build to a tsunami. And the longer you wait, the more likely it is that you will run into problems. Memories fade, receipts go missing, and emails and memos are deleted or thrown away. An entry that could have taken five minutes today might take you hours to resolve in the future. We recommend sticking to a strict bookkeeping schedule to prevent a slide into procrastination. Entries to your accounting systems should be made on a daily or weekly basis (depending on the size and activities of your nonprofit), and all bank and credit card accounts should be reconciled monthly.

Do Digitize

You know how receipts have a habit of getting lost the longer they sit around? So do other paper-based documents, like invoices, contracts, and bank statements. Papers get misplaced, boxed up, or stuck to the back of other papers, never to be seen again. Digital files, on the other hand, are easily organized, searchable by keyword, and able to be backed up in many different locations, protecting you from fire, theft, or computer crashes. Many vendors and service providers will happily offer e-statements - some even charge you a fee for paper statements! And with a simple document scanner and a cloud-based storage system, you can quickly convert any additional paper documents to digital files, keeping them safe and easily accessible for years to come.

Don’t Handle Everything Yourself

Even in very small nonprofits, it’s important to maintain appropriate financial controls. That means keeping certain accounting and bookkeeping tasks separate. Any one person should never have the authority to write checks, prepare financial statements, AND make bank deposits. At auctions and fundraisers, always make sure two people count the cash, and keep a clear record of approval for all expenses. By splitting these tasks among different staff members, you are not only protecting your organization from potential fraud, but you are also building in smart back-up measures to ensure nothing gets miscounted or entered incorrectly.

Do Organize Your Accounts (But Don’t Over-Complicate It)

Nonprofit accounting systems like QuickBooks Online give you a variety of ways to organize your income and expenses. Use your Chart of Accounts to split transactions into specific categories, like membership revenue or shipping expenses. However, be careful not to go too detailed with your chart of accounts. One account for “Office Supplies” is fine, but there’s usually no need have multiple accounts for “Paper, “Ink,” and “Pens.” When you have too many accounts, you run the risk of causing confusion and wasting time for everyone. If you need an additional layer of organization, class and location codes can be very helpful. These allow you to flag different transactions without changing the main account code. For example, if you run several different auctions per year, you can allocate all that revenue to “Auction Income,” but use classes to distinguish between “Spring 2017 Auction” and “Fall 2017 Auction.” This keeps your transactions clearly organized, without causing a headache for your accountant.