Top Reasons to Hire an Accountant for Your Nonprofit Accounting
Basic bookkeeping can seem like you are entering a foreign country without knowing the language or having a guide. Many people find accounting intimidating or do not have the time or skills needed to do it properly. This can create havoc in your nonprofit organization. At a certain point in the life of your organization you will realize you need help managing the organization’s financial information. This is where a good bookkeeper or accountant can come into play.
Perhaps the first reason to get an accountant is to help you keep your finances organized and under control during the year. Your accountant can make sure your income, expenses, assets, and liabilities are all entered into an accounting software and organized in the correct manner required by the IRS. This will make things infinitely easier at the end of the year when you have to file with the IRS. The accountant can also tell you if transactions are not appropriate for your nonprofit because they do not fall under IRS guidelines.
The accountant will also make sure your financial statements are prepared according to IRS requirements. The IRS requires that nonprofit organizations adhere to GAAP (generally accepted accounting practices). With GAAP, there are specific ways your financial data must be entered so the report generated is correct. Having the correct reports will aid in getting grant funding, applying for loans, and purchasing property for the organization. Tax laws in the United States change frequently. Your accountant should have knowledge of updated tax laws and can help ensure your organization is compliant with these laws.
Your accountant will also make sure any employer taxes or tax filings are completed on time. The accountant can tell you exactly how much you owe, when it is due by, and in some cases make the payment for you. The filing of tax returns can also be done correctly and on time thereby avoiding any penalties and other late payment fees which might prove costly to the organization. For instance, the IRS charge penalties of $20 per day up to $10,000 or 5% of the organization’s income, whichever is lower, for organization’s under $1,000,000 in income that file their Form 990 or 990-EZ late. This penalty increases to $100 per day up to a maximum of $50,000 of the organization’s income, whichever is lower, for organization’s with income over $1,000,000. Penalties like this can be devastating for an organization that is just starting out.
Accountants will set up your financial data correctly the first time thus avoiding problems in the future when the information may need to be reentered if done incorrectly. This will make the organization to run smoother and provide you more time for capacity building, fundraising, securing donors, and developing your programs. Nonprofit accountants can also assist you in developing a forecast for the organization’s financial needs in the future and then develop a spending plan that ensures your organization remains solvent and allows for future growth. In fact outsourcing your accounting to a bookkeeper or accountant may save you money because you won’t have to pay another staff member to do it.
Hiring an accountant for your nonprofit will help your organization stay compliant with tax laws, ensure your organization’s financials are recorded correctly, ensure reports are generated in accordance with GAAP, help you avoid unnecessary tax penalties and fees; and potentially help you grow your organization through effective budgeting and planning.