Are you ready to serve nonprofits as a bookkeeper or accountant?

 

We have bookkeepers reaching out to us all the time asking how to break into the nonprofit bookkeeping space. There is a huge need, and we need you! Full honest opinion: we are tired of cleaning up after bad bookkeepers and the impact and fatigue it creates for nonprofits. Nonprofit bookkeeping is more work and carries fiscal stewardship of funds and responsibility.

The world of accounting and bookkeeping is colliding with the increase in technology, automation, AI, and more. No longer are bookkeepers just “paper pushers” and data entry. The modern era of accounting requires being a bit more of a “techy”, knowing what the outputs should look like, and building a system to get there.

 

However, it’s rewarding and enjoyable work when you contribute to the mission and wellbeing of a nonprofit community. Here’s some basics to know if you’re ready to dive in:

 

1. Do you have insurance, a formal business structure?

This may sound silly to many in the field, but we have seen things. Nonprofits receive grants and funding that requires them to be compliant on many ends-including their contractors. This means that to hire you, they need to know you have insurance (they will be asked this on their insurance audits to provide copies of certificates), have multiple clients, and be able to provide them with a W9.

 

2. Are you a QuickBooks Online guru?

Are you QBO certified? Most nonprofits work in QBO and have a low-cost subscription via TechSoup. We hope that bookkeepers don’t sell them a regular subscription for commission, it’s truly heartbreaking when we see an org being overcharged and always hope it is an accident or they don’t know about Tech Soup. Either way, QBO is the most affordable and the industry norm for nonprofits. Please make sure to turn on the nonprofit module, classes, and projects for your clients!

 

3. Can you make your way around nonprofit financial statements?

Can you do accrual-based accounting? Nonprofits are required to generally maintain their books on accrual basis to be GAAP compliant, which is what most of their funding sources require. Nonprofits need to produce a statement of financial position, statement of activity, statement of functional expenses, and cash flow. Nonprofit bookkeepers should know what chart of accounts they need to use to match the IRS form 990 and/or financial statements, along with how to keep functional expenses up to date and allocated.

 

4. Do you know how to account for restricted donations and grants?

Nonprofits can get in a lot of trouble and issues when grant accounting, revenue recognition, timing is off, or when restricted funds are spent for something other than the donor’s intent. Are you comfortable with deferred revenue, reimbursement accounting, recording indirect, and salary allocations based on grant terms? Do you know what the accounting difference is to record restricted donations vs grants? Do you know how to record in-kind donations? Do you know the audit requirements and thresholds that you’ll need to abide and report out on? What are net assets with restrictions vs net assets without and how do you adjust for them?

 

5. Nonprofits need financials, and most of them want board reports the first two weeks of the month

 

Nonprofits need more attention and timeliness compared to those bookkeeping jobs that only need things for tax time. You may find yourself working many more hours the beginning of each month, just to be prepared!

 

6. If you’re charging $30 an hour as a contractor, we know you’re not compliant.

The cost of insurance, self-employment taxes, continuing education, business registrations in each state you work in, IT controls, etc., add up. Most professional bookkeepers charge $75-$200 an hour.

 

Here’s some tips for growing into the nonprofit space:

• Take a nonprofit course such as the Certified Nonprofit Accounting Professional (CNAP), AICPA nonprofit Certificate programs, or others through local nonprofit chapters.

• Ensure you are FTC compliant. Even bookkeepers need strong internal and IT controls.

• Go to your state’s charitable trust division or secretary of state. Read the state roles and responsibilities for filings and regulations that apply to your orgs.

• Meet with the board first before accepting any new engagements. Make sure your engagement letters state who is responsible for which pieces of fiscal management.

 

Here’s a short quiz for you of questions we commonly ask to gage where a person’s comfort level is in nonprofit accounting basics:

 

1. Assets, liabilities, and net assets are found on which statement? 

1. Statement of Cash Flow 

2. Statement of Activity 

3. Statement of Financial Position 

4. Statement of Equity 

 

2. Revenue and expenses are found on which statement? 

1. Statement of Cash Flow 

2. Statement of Activity 

3. Statement of Financial Position 

4. Statement of Equity 

 

3. What are the three categories of functional expenses that nonprofits must track for Financial Statement and 990 purposes? 

1. Program, service, fundraising 

2. Program, taxable activities, fundraising 

3. Program, service, volunteer 

4. Program, management, fundraising 

 

4. What accounting method are nonprofits required to keep their books? 

1. Cash basis 

2. Accrual basis 

3. Modified basis 

4. Depends on the industry 

 

5. What is an example of a prepaid expense? 

1. An annual insurance premium paid over two fiscal years 

2. Purchase of books to sell 

3. Salary expense for a holiday 

4. Items bought for a 4k walk 

 

6. When salary expenses overlap two fiscal years, how do you record the transaction? 

1. Record it all in the fiscal year it was owed 

2. Record it all in the fiscal year it was paid 

3. Break it out and record the first-year portion as a prepaid expense in the first year 

4. Break it out and record the first-year portion as an Accrual 

 

7. When a grant is awarded and received in advance of the organization doing the work, how should the deposit be recorded? 

1. Debit cash, credit deferred revenue 

2. Debit cash, credit grants payable 

3. Debit cash, credit grant revenue 

4. Debit cash, credit prepaid 

 

8. When a grant is awarded, but an invoice must be submitted in order for the organization to be reimbursed, how should the deposit be recorded? 

1. Debit cash, credit grant payable 

2. Debit cash, credit accounts receivable  

3. Debit cash, credit grant income 

4. Debit cash, credit program income 

 

9. What other financial report should the Finance team review often? 

1. Statement of donors 

2. Budget vs cash flow 

3. Budget vs actuals 

4. Statement of aging 

 

10. An individual donor gives $10,000 for widgets, how should this transaction be recorded? 

1. As an unrestricted donation 

2. As a donation with restrictions 

3. As a donation with permanent restrictions 

4. As a liability 

 

11. Where are functional expenses tracked in QuickBooks Online? 

1. As separate expense lines 

2. As a project  

3. As a class 

4. They are tracked outside of QuickBooks 

 

12. What are some examples of key ratios that a nonprofit would find helpful to track? 

1. Cost to raise $1, days cash on hand, and daily burn rate 

2. Cost to raise $1, days receivables to cash, and daily fixed rate 

3. Cost to raise $1, days cash to payables, daily burn rate 

4. Cost to raise $1m, days cash on hand, daily fixed rate 

 

13. If the organization hires independent contractors, what forms need to be collected and filed annually? 

1. W2g, and 1099 

2. W9s and 1099s 

3. W4s and W2s 

4. W3s and 1096s 

 

14. If a new employee is hired, what forms do you need to collect? 

1. W9, I9, and state withholding 

2. W4, I9, and state withholding 

3. W9, A133, and state withholding 

4. W4, A133, and state withholding 

 

15. What is a reasonable day's cash on hand calculation for the nonprofit industry? 

1. 15-30 Days 

2. 30-60 Days 

3. 60-90 Days 

4. 90-120 Days