Many nonprofits rely on their executive director or other staff to take on financial duties such as bookkeeping and accounting. But it is typically a better idea to have them handled separately and to hire outside help.
Your nonprofit accountant and bookkeeper should both have experience in the nonprofit field. But your organization should also know the differences so you can hire for your particular needs.
Nonprofit finances are no joke, so knowing who you can depend on to support your economic growth is crucial to your success. In this article we’ll go over the duties of both nonprofit bookkeepers and nonprofit accountants to show the differences of each role.
[Related: Financial Resolutions for Your Nonprofit in 2022]
Nonprofit Bookkeepers
The role of a nonprofit bookkeeper is to take care of the day-to-day financial needs of your nonprofit, from tracking daily transactions and recording charges to keeping score of bills due and new income.
Finances for a nonprofit require different regulations and guidelines from for-profit businesses. A nonprofit bookkeeper needs to keep in mind things like the use of grants for specific projects, fundraising money, event budgets, member dues, and other nonprofit-specific financial focuses.
Bookkeepers for nonprofits focus on the following duties:
Data Entry
A nonprofit bookkeeper will record all donations, transactions, expenses, and other financial data in a spreadsheet or your organization’s designated software solution.
Paying Bills and Operational Expenses
They also take care of one-sided transactions such as paying bills like utilities, equipment fees, and other necessary expenses.
[Related: The Board Members’ Guide to Reviewing Form 990]
Making Deposits
Bookkeepers will be in charge of making deposits to the nonprofits’ bank, and be your go-to individual for writing checks or signing off on reimbursements.
Payroll Processing
HR can work with nonprofit bookkeepers to regulate and process payroll for the organization’s employees.
Budgeting
Nonprofit bookkeepers keep the organizations’ expenses organized by allocating costs and making sure the budget is grouped by programs, fundraising, administrative, equipment, events, and other relevant categories.
All in all, nonprofit bookkeepers are relied on to record and keep up-to-date whenever money is moved around within the nonprofit organization. However, bookkeepers don’t need to analyze or provide insight on the expenses. Instead, they focus on making sure everything is clear and organized for the nonprofit accountant to review.
[Related: Ten Minutes is All It Takes to Review Internal Controls]
Nonprofit Accountants
Nonprofit accountants are different from bookkeepers in that they require a four-year degree and CPA certification. Rather than organizing and allocating expenses, nonprofit accountants also analyze finances and create the next steps for nonprofits to financially grow and succeed with their specialized knowledge.
Nonprofit accountants perform the following duties for an organization:
Review and Balance Accounts
Accountants will review all accounts to make sure there are no discrepancies, and balance a double-entry bookkeeping system to keep everything in check.
[Related: How to Select an Auditor]
Analyze Transactions and Determine Risk
Nonprofit accountants use their specialized knowledge and experience to analyze transactions and determine your organization’s financial health and risk-factor.
Explain State of Finances to All
Rather than simply tell you if you’re in good or bad shape, a skilled nonprofit accountant will be able to explain the state of your financial affairs to your staff and board members clearly, and be able to relay actionable steps in a digestible manner.
[Related: Top Resources and Tips for Nonprofits When Selecting an Auditor]
Create Reports
Nonprofit accountants will compile detailed reports about your organization’s finances and interpret the next steps based on the gathered information.
Review Year-to-Year Finances
In order to move forward in the smartest way possible, it’s important to look to the past. Accountants will review your books from previous years in order to see what expenses and incomes have changed, and help create predictions for the future of your financial health.
Prepare Books for Audit
Your nonprofit accountant can prepare your books, bank accounts, reports and all transactions for a financial audit. They can also recommend you the best nonprofit auditing firm to complete the audit.
File Appropriate Tax Forms
Accountants also are in charge of completing the necessary nonprofit tax forms, such as the required Form 990 that allows you to keep your 501(c)(3) status each year.
[Related: Why Your Nonprofit Needs an Audit Committee]
As you can see, while the bookkeeper organizes and records, the accountant analyzes and chooses next steps, and relays this information to the head of organizations.
Although nonprofit bookkeepers and accountants have very different responsibilities, they must work together in order to create actionable steps and an accurate picture of your organization’s financial health.
Work with Jacobson Jarvis Today!
If you’re interested in working with a team that’s been serving nonprofits and charitable organizations like yours for the past 30 years, visit Jacobson Jarvis today. We offer year-round communication and access to expertise in nonprofit accounting services. Contact us now and let’s get started.
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