2019-01-15 12:02:17 Nonprofit Organizations English Discover the basics of nonprofit bookkeeping. Learn how you can use accounting tools to manage finances and stay compliant with CRA... https://quickbooks.intuit.com/ca/resources/nonprofit-organizations/nonprofit-bookkeeping-checklist/ A Checklist for Nonprofit Bookkeeping

A Checklist for Nonprofit Bookkeeping

6 min read

You’ve started an nonprofit, and you’re ready to do good in the world. Chances are, nonprofit accounting isn’t at the top of your to-do list. But keep in mind that a great bookkeeping system offers a huge benefit to your organization — it helps you make the most of every dollar so you can make a bigger impact. The trick? Creating a solid, user-friendly system that makes it easy to manage money, stay compliant with reporting requirements, and streamline your expenses.

Choosing Accounting Software for Nonprofit Bookkeeping

Although you don’t bring in a profit, nonprofit accounting can prove quite complicated. After all, you need to keep track of all the money that flows in and out of your organization. This could include:

  • Individual donations
  • Endowments
  • Membership dues
  • Rental costs for fundraising events
  • Volunteer snacks and supplies
  • Office supplies
  • Grants and loans
  • Staff salaries
  • Office rental
  • Revenue from fundraisers

On any given day, your staff might handle a wide variety of transactions. The Canadian Revenue Association (CRA) requires you to keep track of each one so you can report it at the end of the year — even if you’re tax exempt.

Are you wondering how to keep track of all these transactions with a limited staff and a tight budget? That’s where accounting software comes in handy. The right program can make your life easier. As you search, look for programs that offer features such as:

  • Mobile app for on-the-go expense tracking and receipt scanning
  • Transaction categories for donations, grants, and purchases
  • Audit trail function to track all changes to your financial data
  • An option to record the value of donated goods
  • A way to log donors, members, employees, clients, and volunteers
  • Time-tracking integration for volunteers and employees

Are you familiar with QuickBooks Online? If not, keep in mind that it works great for nonprofit accounting due to its easy customization. It has features that let employees record transactions in seconds. When accounting is fast and easy, it frees up your workers to carry out the nonprofit’s mission and serve your audience.

Nonprofit Accounting and Tax Reporting Requirements

Your nonprofit’s reporting requirements depend on the type of organization you run. In most cases, you’re either a nonprofit organization or registered charity. Since both types have tax-exempt status, the CRA expects you to file different types of returns each year.

It a nutshell, the reporting requirements for nonprofits are:

  • Nonprofit organizations: These organizations must file a T2 Corporate Income Tax Return. You may also need to file Form T1044, the Non-Profit Organization (NPO) Information Return
  • Registered charities: These organizations must file Form T3010, the Registered Charity Information Return.

No matter which of these forms your organization needs to file, they’re due within six months after your fiscal year ends.

Is your organization a not-for-profit corporation? If so, your reporting requirements are a little different. To start, you need to file an annual return with Corporations Canada every year, and you must submit this return within 60 days of your incorporation anniversary. If your not-for-profit corporation also qualifies as a nonprofit organization or a registered charity, you also need to file the T2, T1044, or T3010 as necessary.

Creating a Budget for Your Nonprofit

When money is tight, your nonprofit lives and dies by its budget. This makes it worthwhile to spend some time developing a solid financial plan. As you create your budget, these steps can help:

1) Set your goals for the upcoming year.

2) Write down all the costs for each goal, and add in a buffer to cover unexpected costs.

3) Estimate how much your organization spends to operate, including things such as staffing, rent, utilities, and supplies.

4) Add your current funds, pledged donations, expected fundraising revenue, and other sources of income.

5) Compare your income to your costs. Using this information, you can find new fundraising options or make cuts to your expenses.

6) Define stretch goals — the things you want to do if you bring in more money during the year.

As the year progresses, you can use your budget as a guide. Before you start a new project, it’s a good idea to refer back to the budget to see how much money your organization has available. That way, it’s easier to avoid overspending or losing track of your finances. Keep in mind that your budget is a living document, so you might need to make changes during the year.

For instance, do you need to spend more than you expected on event marketing? If so, you might do so by cutting costs elsewhere. Did you receive a surprise donation? You might look to your stretch goals to decide how to spend it.

Streamline Payroll and Bookkeeping for Nonprofits

If your organization works like many nonprofits, it probably doesn’t have the funds for a large full-time staff. As a result, you might use a mix of full-time staff, part-time workers, and independent contractors to stretch each dollar. This mix of employees and hours, however, can make paydays complicated. For example, what happens if you don’t have room in the budget for a full-time human resources (HR) worker? In most instances, you probably end up doing payroll yourself.

Fortunately, plenty of options exist for streamlining your payroll. Time-tracking makes a great place to start. Do you currently spend time going through employee time sheets or tracking down each person to ask for their hours? If so, you can save time and boost accuracy with a time-tracking tool. That way, every employee or contractor can log their time — often, right from their mobile phone. When it’s time for payroll, you can click right into the system to see everyone’s hours.

If you want to save money and time, it makes sense to choose time-tracking and payroll systems that integrate with your accounting software. That way, you can import hours, complete payroll, and record the payments. If you want to make things even easier, you can choose an accounting program with built-in time-tracking and payroll. In QuickBooks, for example, you can:

  • Track billable hours
  • Set different pay schedules and rates for each employee
  • Calculate payroll
  • Send free direct deposits

This option keeps all your nonprofit bookkeeping tasks in one place, so you never need to worry about reconciling. Most importantly, it’s easy and saves valuable time. Do you want an extra burst of efficiency? Consider direct deposit. It’s cheaper and less error-prone than traditional paper cheques. Plus, your employees get their salaries instantly without the need to go to the bank or deal with mobile cheque deposit.

Managing Donors and Ongoing Development

When you first start a nonprofit organization, you might be bringing in money from grants and a few donors. As you grow, your funding sources become more diverse. You might get gifts from corporations, for example, or you could start making money from investments. Your development workers also start to build relationships with current and potential donors.

At some point, your donor and development needs are likely to outgrow the capabilities of your accounting software. When that happens, it’s time to add development software into your technology mix. These programs are specifically engineered to help your nonprofit track donations and maintain relationships with donors. They can:

  • Collect contact information for potential donors
  • Track communication with potential and current donors
  • Manage fundraising campaigns and events
  • Manage planned giving and endowments
  • Cultivate prospective donors
  • Handle email marketing
  • Monitor social media mentions

Most importantly, development software helps you create reports to analyze your data. You can see what percentage of donors you retain in a year, for example, or analyze campaigns to see which strategies work best for your audience. With that information, you can more easily create a powerful development strategy.

A great bookkeeping system creates a solid, lasting financial foundation for your nonprofit. With the right tools, you can create a no-hassle strategy that makes nonprofit accounting a breeze. Do you need help? If so, 5.6 million customers use QuickBooks. Join them today to help your business thrive.

Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

Related Articles

Compliance Requirements and Non Profit Accounting in Canada

Are you considering the addition of nonprofit bookkeeping to your firm’s list…

Read more

Should Your Small Business Be For-Profit or Nonprofit?

Do you want your small business to operate as a nonprofit or…

Read more

Using E-Books to Build Your Brand

An e-book is a great marketing tool, and it can even help…

Read more