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Your Nonprofit is Only as Strong as its Bookkeeper

05/04/2018 Stephanie Allgeyer

The founder of a community theater had always kept the group’s books. But the theater was growing, along with her responsibilities. So when a volunteer offered to act as bookkeeper, the founder gratefully accepted. Unfortunately, while well-intentioned, the volunteer was sloppy and didn’t really have the available time to truly commit. When vendors started complaining about unpaid invoices, the group’s leader knew there was a problem.

Here’s how to prevent this kind of bad bookkeeping from damaging your nonprofit.

Why you need to hire your help

Although volunteers can fill many important roles, some jobs — including bookkeeping — are best handled by paid employees or paid services. Your nonprofit’s financial integrity is simply too important to leave to an unpaid, and possibly inexperienced bookkeeper. This individual doesn’t have to be full-time. Many smaller nonprofits hire part-time or contract bookkeepers.

Before searching for a bookkeeper, consider what the position will demand. Most nonprofit bookkeepers are tasked with entering income and expense data into an accounting system (which an accountant will then use to create financial reports and prepare tax documents). Depending on the size and nature of your nonprofit, your bookkeeper may also be asked to:

  • Track income and expenses by program,
  • Pay bills, make bank deposits, and process credit card payments,
  • Record accounts payable, accounts receivable and cash receipts,
  • Reconcile bank statements,
  • Post adjustments to the general ledger,
  • Help with year-end financial audits and tax preparation, and
  • Send donor acknowledgments, order supplies or engage in other clerical duties.

Although bookkeepers don’t need accounting degrees or a CPA qualification, they should understand accounting terms and principles, be comfortable working with computers and accounting software, be detail-oriented and be able to meet strict deadlines.

Nonprofits are different

An otherwise qualified bookkeeper with only for-profit experience can be a good candidate for your organization. But if you hire such a person, make sure he or she understands that there are differences between for- and nonprofit accounting. Any hire will need to get up to speed quickly on recording such items as pledges, donated goods and services, and restricted donations. For instance, with a nonprofit more emphasis is put on budget tracking and monitoring of cash flow may be deemed more difficult.

Prospective bookkeepers should also be carefully screened for ethical violations and criminal activity. Many nonprofits are defrauded by bookkeepers who have been given free access to financial records with little staff or board oversight. Your bookkeeper may be handling cash, depositing checks, entering donors’ credit card numbers and viewing other sensitive information. So you need to conduct thorough background and credit checks — including following up on references — and always provide proper supervision by a trusted manager. Your outside accountant can work with your organization on some simple oversight and compensating controls.

Right person for the job

You wouldn’t let just anyone manage your personal finances, so don’t let just any volunteer or unqualified staff member keep your nonprofit’s books. The wrong bookkeeper can put your organization in great peril — even lead to its downfall. If you aren’t sure where to begin your search, talk to your accountant or financial advisor for ideas.

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