Tips for All Nonprofits

Nonprofit organizations have a lot of hard work to do in order to succeed. While it might seem like nonprofits would not have to worry about finances, being called nonprofits, the truth is that they do. Nonprofits are organizations, often charitable organizations of sorts, that do not run or work to make a profit (although they may have a paid staff that helps run the organization). Nonprofits still work with money, and while they are tax exempt, certain standards need to be adhered to in order for this to apply. For nonprofit volunteers or staff members, navigating around nonprofit accounting can be confusing. Here are a few things to remember when it comes to nonprofits and accounting.

Keep a Record

While a nonprofit might not be conducted to earn a profit for the organization, it does still conduct monetary transactions, most often in the form of donations and other charitable contributions. It is important for any nonprofit organization to keep a record of any money or monetary contributions they receive. It is also important to keep a record of any purchases, or sales of any sort made by the organization. This could be as simple as office supplies to rent or lease payments. Successful nonprofit accounting begins with good record keeping.

Nonprofits still handle money and proper nonprofit accounting is a necessity.

Apply for Proper Tax Exemptions

In order for a nonprofit organization to be exempt for particular federal and state taxes (that a for-profit business would not be exempt from), certain procedures have to be adhered to, and particular IRS forms need to be filled out. 501(c)(3) refers to the main tax exemption from the IRS for most nonprofit organizations. In order to quality for this exemption, a nonprofit has to fill out (typically form 1023, or form 1024) and submit an application to the IRS for tax exemption. Nonprofit accounting will be possible once these forms are submitted and approved.

Hire a Professional

Keeping a good record of incoming goods and applying for tax exemption is important, but sometimes nonprofit organizations need help. Volunteers and even paid staff members might not have the professional knowledge of nonprofit accounting in order to properly account for a nonprofit organization. What happens if a nonprofit runs into issues with their record keeping? What happens in the IRS decides to conduct an audit of a nonprofit?  Unfortunately issues like these can occur. Even the smallest, accidental accounting mistake can lead to large consequences in the future. This is why hiring a nonprofit accountant, whether full-time, part-time, or even just on a short-term contract is important to help prevent any accounting mistakes from happening.

No matter how big or small a nonprofit is proper nonprofit accounting is essential. Keeping a record of all monetary funds (like donations) going in, and purchases being made, as is apply for a tax exemption status. Even with this, a nonprofit should look to a hire a professional accounting organization to help with their nonprofit accounting needs.

RBZ LLP is one of the largest public accounting firms based in Los Angeles, comprising of experts who provide specialized consulting, tax, and accounting services to not-profit organizations and companies. To understand the principles of non-profit accounting better, visit Thenonprofittimes.com.