Navigating Key Bookkeeping Challenges for Nonprofits

Nonprofits have several specialized bookkeeping concerns that are different from for-profit businesses. Some of these concerns include:

  1. Fund Accounting: Nonprofits have multiple funds, and each fund has its own set of financial statements. It is important to keep track of the inflow and outflow of funds for each program.
  2. Grant Tracking: Nonprofits often receive grants from various sources, and each grant has specific requirements for how the funds can be used. It is important to track each grant separately to ensure compliance.
  3. Donor Restrictions: Nonprofits often receive donations with specific restrictions on how the funds can be used. It is important to ensure that these restrictions are properly recorded and followed.
  4. Functional Expenses: Nonprofits are required to report their expenses by function (e.g., program services, management and general, fundraising) to show how they are using their resources.
  5. In-Kind Contributions: Nonprofits may receive contributions of goods and services, which need to be properly recorded and valued.
  6. Tax-Exempt Status: Nonprofits are exempt from paying federal income taxes, but they still need to file annual tax returns and comply with various tax laws and regulations.
  7. Board Oversight: Nonprofit boards are responsible for overseeing the financial management of the organization, and it is important to keep them informed about the financial health of the organization.

What Skills Should a Nonprofit Bookkeeper Have?

Nonprofit organizations should look for several key qualities when hiring a bookkeeper:

  1. Nonprofit experience: Look for a bookkeeper who has experience working specifically with nonprofit organizations. This will ensure they understand the unique financial reporting and compliance requirements of nonprofits.
  2. Attention to detail: Nonprofit bookkeepers need to be meticulous and detail-oriented, as they will be responsible for managing financial records, tracking donations, and preparing financial statements.
  3. Knowledge of accounting software: Many nonprofits use accounting software to manage their finances, so it’s important to look for a bookkeeper who is familiar with the software used by the organization.
  4. Communication skills: The bookkeeper should be able to communicate clearly and effectively with the organization’s staff and board members to provide updates on financial performance and answer questions.
  5. Understanding of nonprofit mission: Ideally, the bookkeeper should have a passion for the nonprofit’s mission and be committed to supporting the organization’s goals.

Overall, nonprofit organizations should take the time to carefully screen potential bookkeepers to ensure they have the necessary skills, experience, and qualities to help the organization succeed financially.

Caroline Grimm

Caroline Grimm is an accounting educator and a small business enthusiast. She holds Masters and Bachelor degrees in Business Administration. She is the author of 13 books and the creator of Accounting How To YouTube channel and blog. For more information visit:

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