Early-stage nonprofits
In the early years, many small nonprofits rely on a volunteer treasurer, a board member with a financial background, or a part-time bookkeeper. That can work well when your organization is small, your finances are straightforward, and you are not yet required to have an audit.
The limitations of this approach become clearer as you grow.
Signs it is time for dedicated support
- You are approaching or have exceeded $500,000 in annual revenue
- You are receiving grants that require separate tracking and reporting
- Your board is asking for financial statements and you are not sure how to produce them
- You have employees and are managing payroll
- You are approaching an audit requirement and your books are not audit-ready
- Your executive director is spending significant time on financial tasks that take them away from program and fundraising work
- You have had late or missed 990 filings
- You are managing multiple restricted grants simultaneously
What nonprofit accounting involves
Nonprofit accounting is different from small business accounting in meaningful ways. Fund accounting, grant tracking, restricted net assets, ASC 958 compliance, Form 990 preparation, and audit readiness require specific knowledge. A general bookkeeper who knows QuickBooks but has not worked with nonprofits may not have these skills.
When you hire outside accounting support, ask specifically about their nonprofit experience. Ask how many nonprofits they work with, whether they prepare Form 990, and whether they have experience with audit preparation and funder reporting.
What to look for
- Experience with fund accounting and restricted grants
- Familiarity with your accounting software
- Experience preparing Form 990
- Ability to produce board-ready financial statements
- Good communication and responsiveness
- Clear fee structure with no surprises
The cost of waiting
Disorganized books are expensive to clean up, especially when an audit is approaching. Missed or late 990 filings can result in penalties. Inaccurate grant reporting can create compliance problems with funders. The cost of getting good accounting support in place is almost always lower than the cost of fixing problems that build up without it.
Starting the conversation
If you are not sure whether you are ready for outside accounting support, a short call with a nonprofit accountant can help you figure it out. A good accountant will give you an honest assessment of where you are and what you actually need, not just try to sell you a full engagement.
This guide shares general information, not tax, legal, or accounting advice for your specific situation. Rules change, so check current IRS and FASB guidance or ask me about your organization.