Top 10 Best Accounting Software for Nonprofits Free & Paid

how to build a nonprofit bookkeeping system

Start by implementing a code of ethics, which will also show your donors, board of directors, and employees the values of your organization. Below is a list of best practices while managing your books, which will help protect your organization’s financial data. It is recommended you read up on the IRS’s latest rules and regulations to supplement these best practices. Nonprofit and for-profit businesses vary in the overall purpose of their existence. A nonprofit’s mission focuses on activities that benefit society, instead of trying to maximize profit. Nonprofits have a public ownership, which means nobody owns shares of the company or interests in its property.

A nonprofit’s bookkeeping financial statements include the statement of financial position, statement of activities, and statement of cash flows. For-profit financial statements include the balance sheet, income statement, and statement of cash flows. Many nonprofit organizations end up cobbling together accounting, donor management, and payroll services by using multiple programs, making things confusing during end-of-year reporting.


Your nonprofit accounting software should be able to produce financial reports that meet the reporting requirements set by the IRS. Specifically, your nonprofit accounting software should be able to produce a Profit and Loss report, Balance Sheet, and Schedule C report. Financial management software is often included in any nonprofit accounting software. However, it’s important to remember that this type of software goes beyond the financial position of the business. While most people think of nonprofit accounting software as financial management software, there are other types of accounting software for nonprofits.

You can always ask your bank about your account options and use those tailored for nonprofits. If outsourcing your accounting needs sounds like a tempting option for your organization, be sure to look for a firm that works specifically with nonprofits. That way you can rest assured that they’ll be well-versed in fund accounting and able to answer nonprofit-specific questions. Our professional opinion is that the majority of nonprofits will benefit from outsourcing their bookkeeping and accounting needs, working directly with nonprofit accounting experts. It’s an affordable option that can provide access to deep nonprofit accounting experience and expertise.

Select an Accounting Software

These groups are just one way of keeping nonprofit organizations on track with their finances. Nonprofits rely on accurate, timely financial information throughout the year. Here are a few items to watch closely each month on your nonprofit financial statements. The statement of functional expenses was once only required for health and welfare organizations, but the FASB now requires all nonprofits to report expenses by their function and nature.

One HUGE part of any good nonprofit accounting system is a detailed annual budget that’s written and tracked. No matter what software you choose, the most important part of nonprofit accounting may be communication. Couch recommends keeping your staff and board members updated on what your accountants do and discover.

Nonprofit  Resources

You can easily see how your nonprofit uses the funding it receives from fundraising, grant seeking, and other revenue streams by analyzing this statement. You must research and acquire the use of a nonprofit bookkeeping system that works for you and your staff. We also suggest that you find an accounting system that can perform fund accounting. You will want to open a bank account that is separate from your personal bank account.

  • You’ll find more detailed information on some of these sections later on.
  • If your nonprofit collects membership dues, you would record income when you send the invoice, even though you haven’t physically received money.
  • Start by implementing a code of ethics, which will also show your donors, board of directors, and employees the values of your organization.
  • For example, a grantor, insurance company, creditor or state agency may require you to keep records longer than the IRS requires.
  • Accounting may not be the most glamorous part of any business, including nonprofits, but it’s instrumental in keeping your organization running smoothly.

However, there are a few basic steps that all charities in the nonprofit sector should follow. Whether a seasoned professional or just starting, here are a few suggestions for making the most of nonprofit accounting. For-profit businesses have well-established accounting practices that you might already know. There are plenty of commonalities between these nonprofit bookkeeping processes and the guidelines nonprofits must follow in accounting. With Kindful’s QuickBooks integration, users get all the power of QuickBooks accounting combined with Kindful’s intuitive donor database. With a two-way sync between QuickBooks and Kindful, all of your data flows seamlessly between your donor database and your accounting software.


A nonprofit doesn’t sell goods and services for a profit that can be tracked within an ordinary chart of accounts in a general ledger. Unlike accountants, I come from the nonprofit world and understand the specifics of nonprofits financial reporting needs. Some have no bookkeeping records at all, while others are multimillion dollar organizations. If your nonprofit is larger, works with hundreds of donors, and accepts online payments, you’ll need a more robust solution—something like Xero or Sage Intacct.

how to build a nonprofit bookkeeping system

Martin Bacher

+49 170 6289463 oder besser 08064 1003

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