Nonprofits have unique accounting needs. Meeting the financial requirements of donors, board members, regulators, and other stakeholders takes effective, precise accounting practices that demonstrate both fiscal integrity and compliance with governing tax laws.
Like most organizations in the private sector, many nonprofits do not have the expertise or bandwidth in-house to manage the complexities of their accounting needs. Unlike for-profit firms, nonprofits are under heightened regulatory scrutiny to maintain their tax-exempt status, which means their accounting requirements can be much more extensive.
Accordingly, an outsourced accounting model is a great option for many nonprofits. Selecting the right partner can be tricky, though, as not all accounting firms fully understand the breadth of financial pressures nonprofits face.
So, what skills and expertise should nonprofits look for on an outsourced accounting partner – and what other attributes are essential to a successful relationship?
Sector, Regulatory Experience
The accounting firm you select should have deep experience working with nonprofit organizations and have experts on staff who are well versed in all governing tax laws. Ultimately, the partner you choose must be able to help your organization:
Stay compliant, check out our Nonprofit accounting page and see how Scrubbed can help your NPO.
Financial reporting is key to helping your nonprofit maintain compliance and communicate well with stakeholders. To that end, your outsourced accounting partner must have the expertise and staffing capacity to help you both keep complete, up-to-date financial records and create the many reports donors, board members, regulators, and other stakeholders require.
Perhaps the most important financial statement a nonprofit must produce is the Form 990, which is filed annually with the IRS and must be accessible to the public as well. This form is used to demonstrate that the nonprofit qualifies for tax-exempt status, that its funding is, in fact, directed toward its underlying mission, and that the organization is not in any way abusing its tax-exempt status. Board members, donors, the media, and members of the general public may request a nonprofit’s Form 990 as well to see how funds are used and assess the organization’s overall financial health.
Other key reports your accounting firm must be experienced at creating include:
Budget-to-actual reports are also recommended for nonprofits for both evaluating operating practices and future strategic planning.
While reporting, planning, and regulatory compliance are critically important to your nonprofit’s success, the partner you select should also be there for the day-to-day financial tasks that keep your organization running smoothly, including:
As a nonprofit, though, your organization is about much more than money management. Nonprofits are expected to operate with the utmost integrity and transparency, which is why the reputation of the accounting firm you select is so critical. So, be sure to check references and confirm that you are working with a partner that shares your values and that brings to your organization the ethical standards that define your mission and that your donors and communities deserve.
Why Choose Scrubbed
Best of all, we share your values of integrity, empathy, openness, and commitment to excellence, which means we are both an ideal fit for your organization’s culture and a valued asset in the eyes of those you support.
Let us help you continue to transform lives and communities. Contact us for a free consultation today