Nonprofit Accounting ChallengesPosted on January 18th, 2018
Every not-for-profit organization can face accounting challenges unique to their field. The balancing act between managing money provided by the government and their own revenue creates distinct complications. Knowing what these, and other matters of compliance are, will help you better ensure a long, successful operation for your non-profit.
Managing Multiple Funding Sources
Given that non-profits are involved in furthering altruistic causes, there are plenty of governmental initiatives designed to help them better serve their community. This assistance can come either from grants or, in the case of daycares and similar service-based organizations, contracts.
Unlike nonspecific revenue gathered through donations, government funding is considered a distinct source of money with its own accounting and reporting requirements. These funds are dedicated to a distinct purpose and cannot be lumped together into the greater sum of an entity’s operation. Non-profits must separate funds that are received by grants and contracts from their general expenses and operational costs to maintain compliance and their tax-exempt status.
Similarly, each government grant and contract must be tracked separately from the rest. Even if the revenue for two separate grants are used to accomplish the same goal, the law and the standards of good accountability demand that each resource is independently tracked and managed.
With each additional revenue source a non-profit receives, the sheer volume of reports that must be prepared and filed increases. As a result, a key challenge is having the bandwidth to ensure every report is both prepared precisely and filed by deadline. This will often require the support of a dedicated firm that possesses the resources to maintain a proper reporting schedule.
As stated, grants and contracts supplement the income your organization receives from charitable contributions, fundraisers and other revenue sources. A common challenge is making sure there are no hurdles to tracking the revenue in a timely fashion.
With the above in mind, it is important that non-profit directors have a streamlined process in place for accounts receivable. Working with an accountant can help you determine and implement better ways of keeping accurate records on a daily basis.
Contact Us for Nonprofit Accounting
Alston & Company provides accounting support for non-profit organizations in Freehold, Newark, Trenton, New Brunswick, and all surrounding communities. We are happy to help founders and directors alike maintain accurate books and track revenue effectively. For more information about how we can help you succeed in your mission, call us and schedule a consultation today.