Just as with organizations that pursue profits, non-profits must also comply with stringent regulations for financial reporting and accounting, so that they can show openness to members, funders, and regulatory authorities, as well as preserve their status.
Having solid bookkeeping and accounting in place is critical for any non-profit organization that wishes to secure funding and pursue its cause, and you might not be surprised to learn that many such organizations choose to seek help with this from professional sources, like bookkeeping services in Surrey.
But even if a non-profit does seek professional help, which is generally recommended, it can still be helpful to understand the processes involved with bookkeeping and what it takes to keep an organization compliant with both its’ requirements for financial reporting, and tax regulations.
Here are some non-profit bookkeeping best practices:
Keep up-to-date with accounting rules for your jurisdiction
Periodically check that your accounting processes fall in line with all relevant jurisdictional rules governing non-profits. If any modifications to laws have recently taken place, ensure that you’re still meeting your responsibilities in terms of finances and taxes.
Set up fund accounting
Helping to guarantee transparency and accountability in the way funds are used, fund accounting is a technique commonly used by non-profits to keep money separate based upon contributors, boards, or grants intended uses, and enables an organization to accurately monitor and record each funds’ financial condition.
Keep detailed records
As with any organization, maintaining accurate, detailed and comprehensive financial records, provides evidence of financial statements, internal audits and tax filings for bookkeeping and accounting purposes, as well as budgeting and financial planning.
Ensure that each and every financial transaction is properly documented, including investments, accepted gifts and incurred costs.
Monitor donor funds closely
Gifts made to non-profits typically come with stipulations as to how that money should be allocated, and it’s very important to always abide by these instructions, while keeping a close eye on such funds.
The most effective way to monitor gifted monies, is to create a separate account for limited money, and another for that which is unrestricted. This way you can guarantee that the donor’s wishes are met, while also promoting ethical financial administration.
Be prepared for audits
It’s not unusual for non-profits receiving contributions from the public that are significant, or government subsidies, to be required to have external audits carried out. Evaluating an organizations financial procedures, audits also ensure that accounting standards are complied with.
It’s advisable for non-profits to always be prepared for an audit, and the best way to do this is by maintaining financial documentation that is both well-structured and transparent, and by setting up robust control measures internally.
Manage your finances effectively
For non-profits, having effective strategies for budgeting in place, is the only way to ensure that limited resources are efficiently allocated, and that goals and objectives are accomplished.
Put a practical financial plan in place that is aligned with your organization’s objectives, and assess and modify it on a regular basis in accordance with any changes to expenditures or financial resources, and real-world outcomes.
Be transparent with stakeholders
To give stakeholders and other contributors confidence that your non-profits financial reporting is transparent, you should use bookkeeping in Surrey to help you disseminate financial statements and yearly reports that interested parties can readily obtain. Convey how cash is allocated in an effective manner, and what the outcomes of such efforts were for the organization.
To ensure that these best practices are adhered to at all times, it’s prudent to hire a professional service that specializes in bookkeeping for non-profits. With their full understanding and experience of the distinct financial reporting requirements, they can help you maintain your purpose while keeping contributors satisfied.