Nonprofits do a lot of amazing things for people in our society. Nonprofits range from organizations such as charities, social service agencies, sports and arts programs, even nutrition and lunch programs. They are essentially a business that is dedicated to the public good and their primary vision is not to make a profit and expand for the enrichment of stakeholders. Since these businesses are about giving back to the community and not taking money from it, you can imagine that funding is a huge challenge for these organizations. This is why accounting and proper financial management is essential for nonprofits. They need to stay on top of this so they can accurately account for every dollar that comes through the organization. Here are some reasons why accounting is so important for nonprofits.
Nonprofits Have Tax Entitlements
Nonprofits are usually entitled to a number of tax incentives and benefits for their service to the public good. This can include write offs for employee wages, materials and resources, and other operational expenditures. Many people who run non-profits may not be aware of the tax breaks they can enjoy because tax law can change annually. This is when the knowledge of an accountant can help. They know what these organizations can claim on their taxes to make sure that non-profits keep as much of their finding as possible to help their clientele.
Organization Equals More Money
Nonprofits are in the business of helping people without regard to making a profit. Obviously this requires an extremely strict budget and constant fundraising to help meet the needs of the people that use the services non-profits provide. Keeping your financial statements and bookkeeping organized and up-to-date can go a long way in keeping money in the business. Hiring professional accountant can ensure that your financials are in order and that your reconciliations are done monthly or quarterly. This will dramatically improve the financial health of a nonprofit.
Nonprofits Ned to Track All Expenses
Accurate expense tracking is extremely important for nonprofit organizations. It’s almost more important than in for profit businesses because of the tight budget under which nonprofits have to operate. In the zeal of the mission to aid others, nonprofits have tended to have less than optimal tracking procedures for expenses. An accountant can help a company to set up and maintain an effective system for tracking funds and expenditures in a nonprofit atmosphere.
Accounting Procedures Matter to Donors and Investors
Responsible financial reporting is not only good for saving money and for tax purposes; it is also increasingly becoming more of a factor that people consider when they decide to donate and give funds to a nonprofit. You have to remember that transparency is the key to winning trust. Wouldn’t it impress your potential donors if you can give them a past, current and projected vision of your organization’s finances? This will give them the confidence that their money will go to a worthy cause and will be used wisely. That will result in more donations for your nonprofit that can be put to use in the community you serve.
Accurate Accounting Helps You Make Decisions
Although nonprofits hope for smooth sailing, the reality is there may be a crisis that occurs in their community that will over extend the resources that you have to offer. Accountants can help you become prepared for this eventuality through allocating savings. They can also help nonprofits make quick financial decisions when they need to. This helps to avoid slow reaction and bureaucratic red tape when an emergency happens and a nonprofit’s services are needed the most.
Nonprofits are essential in our society (marketdone.com/so-how-do-non-profits-benefit-society). They provide many life enriching services for people who are in need. This is why accounting is so important for these organizations. Their cash flow can be limited and they may be operating with a small staff and resources. Accountants can help to save nonprofit money by taking advantage of tax exemptions, proper financial organization and expense reporting. They also help by adding a level of legitimacy and transparency that can put potential donors at ease. Knowing the financials can also give a nonprofit quicker turnaround time with decision making as well. All of these are reasons to hire an accounting firm to improve your nonprofit’s financial strength.