3 Ways Nonprofits Can Benefit From Having a Trusted CPA

It’s hard running a nonprofit business. Most days, it’s like you’re part of a band—and you’re the drummer, the lead guitar, the bass guitar, and lead singer (while running sound and lights) all at the same time—and struggling to keep tempo!

We understand that nonprofits have different accounting needs from for-profit businesses. We’ve been down the road you’re on with a number of organizations and we’ve identified 3 ways nonprofits can benefit from having a trusted CPA.

1. YOUR BOOKS DON’T HAVE TO BE A MESS!

Don’t try to run your nonprofit’s books the way you were taught in your intro business classes in college. Whereas for-profit accounting tends to focus on tracking profits and losses, nonprofit organizations need to keep a clear record of where their incoming funds come from, what they were given for, and whether they were used for those purposes.

To achieve these goals, nonprofits use something called fund accounting. Fund accounting allows nonprofit businesses to track every dollar that they spend, tracing its path back to the original source, thus ensuring that what the donor gave a donation for was actually met by their donation. This is no small task!

While the one-man-band approach might lead to an executive director who happens to be able to remember where every donation come from and do their best to tie them to the right kind of spending, there won’t be the kind of paper trail that is necessary for auditors—and you will find yourself being tracked by auditors if you’re a nonprofit. It’s just the nature of the business, as most nonprofits are given tax-exempt status. Thus, the IRS holds nonprofits to a higher standard by making sure that the requirements that allow them to be a nonprofit are maintained and trackable.

While this is difficult for the average person, a CPA is no average person. We have one of the most dependable titles in the business world and spend countless hours in ongoing education to keep our certification. Therefore, we are fully trained and able to come along beside you and ensure your nonprofit’s books are clean and tell a consistent story when the auditors come calling.

2. YOU WON’T MISS CRUCIAL REQUIREMENTS (AND POTENTIALLY LOSE YOUR NONPROFIT STATUS)

This biggest part of nonprofit accounting is the account-ability. You have a lot of burdens to prove if you are going to keep your nonprofit status!

First, you need to be sure your tax returns are filed both accurately and on time. The IRS publishes a list of organizations every year whose tax-exempt status was revoked because they failed to file the necessary forms. If you get behind on your filing status, you will be faced with expensive penalties and interest that you will have a hard time recovering from.

Next, you need help knowing if your nonprofit needs to have an independent audit. It may not be this year, and it may not have been last year, but soon a grantor or government agency (whether federal, state, or local) may come calling for a copy of your audited financial statements. Additionally, if you are seeking a contract or grant with state and local governments, you may need to conduct an independent audit according to local laws.

But above all else, you need to be aware of what you need to run your organization well. There are many different types of non-profit businesses, and each one has a plethora of requirements (and restrictions) on how you are to do business. You need a CPA on your side who can help tease out what is required for your specific operation and who will help you succeed.

3. WE SPEAK AUDITOR-ESE—WITH EASE

We know—CPA-speak can sound like another language. But consider this—we’re actually the interpreter. It’s the auditors who speak the pure form, and you’re going to have a hard time communicating if you’re having to pull out an IRS dictionary every time you need to communicate.

But, it doesn’t have to be that way! Having a CPA on your team will help succeed from the one-off phone calls all the way up to communicating with your external auditor. Having a CPA with you will also help calm down the auditor because he or she knows that the CPA knows the right things to do and will do them in a manner that meets requirements—or risk losing his or her license.

As stated earlier, by the fact that it takes so much time and effort to earn and then keep one’s CPA license, showing the IRS that you are utilizing one in your organization adds an amount of credibility to your operation, making any external auditors assume the best of you instead of the worse.

WE CAN HELP

We know you’re likely overwhelmed and don’t even know where to start. But know that this isn’t our first rodeo. Give us a call and we can quickly ascertain what is necessary to begin helping your non-profit comply with the law so that you can get back to running the nonprofit you love. In the metaphor of the one-man-band, we look forward to taking some instruments off of your plate. Get ready for a great show!

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Nov 11, 2020
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