Nonprofits: 3 Accounting Challenges You Need to Know
Nonprofit organizations are obviously different from private businesses in their end goals and where their money ultimately goes. But they still share many similarities – they need to generate revenues, operate under budgets and hire employees, among other necessary functions.
Also like private businesses, nonprofits face a number of accounting challenges. But obviously given their completely different structures, nonprofit organizations are up against a number of completely different rules and regulations.
The following are a few of the accounting hurdles you and your nonprofit might have to clear over the course of your organization’s life.
Seasonal Cash Flow
Many nonprofits rely on the gifts of individuals, and that can result in some very irregular peaks and valleys in cash flow. While most businesses tend to bring in money across the year, nonprofits that depend on individual donations get most of their cash across just a few periods – typically during the holiday giving season (when people often look to make deductible charitable contributions). That makes cash-flow management exceedingly important, including seeking out bridge funding for the in-between times when money isn’t flowing in.
Tracking Grants
In many cases, grants might be the lifeblood of your business, so it’s vital that you’re able to properly track these gifts throughout the calendar year – that includes remembering proposal deadlines, gathering supporting documents for proposals and otherwise keeping up with your grant status. Just like small businesses can use accounting software, nonprofits can make use of a few grant-tracking applications. These include GrantHub, which manages tasks, applications, reports and grant documents and even provides important date reminders, and Grantseeker, which not only offers grant-tracking solutions but also helps you apply for grants and provide “impact updates” on how your cash is being spent.
FASB Guidelines
The Financial Accounting Standards Board (FASB) is in charge of standard accounting rules, which is good because that means there’s a uniform set of rules everyone plays by. The downside? These standards change almost every year, requiring accountants to be up-to-date on every line change of these complex accounting rules. For instance, over the past few years, the FASB changed rules having to do with functional expense presentations and liquidity disclosures – basically, how certain information must be presented.
Keeping up with these standards can be difficult even for pros, let alone someone who’s just trying to tackle accounting duties along with their other tasks as part of a smaller, understaffed nonprofit. That’s why you can use a helping hand from McManamon & Co. We offer various services to small and midsize businesses, but we also can help nonprofits with things such as attaining compliance, reducing operating costs … and, of course, navigating accounting issues.
Don’t let your nonprofit get caught short on cash or behind on compliance. Call McManamon & Co. at 440.892.9088 or contact us online today!
Tags: accounting, McManamon, nonprofit | Posted in accounting, McManamon & Co., nonprofit, nonprofit taxes, small business