Managing the finances of a nonprofit organization can be overwhelming. Between keeping track of donations, applying for grants, handling restricted and unrestricted funds, and ensuring compliance with both provincial and federal regulations, there are a lot of complexities to consider.
For many nonprofits, attempting to handle all this in-house or through DIY methods can lead to costly errors and inefficiencies.
This is where nonprofit accounting services come into play. As an experienced nonprofit accountant in Calgary, Canmore, and across Alberta and New Brunswick, our founder, Harry Launchbury, ACMA, CGMA, has helped nonprofit organizations of all sizes streamline their finances.
In this post, we’ll tap into his experience to explore the role nonprofit accountants play in helping nonprofits stay organized, compliant, and able to focus on their mission. We’ll also provide guidance on how to choose the right accountant for your nonprofit organization’s needs.
What is Nonprofit Accounting?
Nonprofit accounting is a specialized field that focuses on managing the finances of nonprofit organizations. According to the Canada Revenue Agency (CRA), a non-profit organization (NPO) “is a club, society, or association that is not a charity and that is organized and operated solely for:
- social welfare
- civic improvement
- pleasure or recreation
- any other purpose except profit
To be considered an NPO, no part of the income of such an organization can be payable to or available for the personal benefit of any proprietor, member, or shareholder, unless the proprietor, member, or shareholder is a club, society, or association whose primary purpose and function is to promote amateur athletics in Canada.”
Unlike for-profit businesses, which are primarily concerned with generating profit, nonprofits have to focus on financial transparency, accountability, and adherence to legal and regulatory requirements. This is why their needs go beyond traditional business accounting.
In Canada, nonprofit organizations are governed by specific standards, including the Accounting Standards for Not-for-Profit Organizations (ASNPO), and they often have to follow unique rules when reporting financials, especially regarding restricted and unrestricted funds. Professional nonprofit accountants ensure that your organization complies with these standards and that your financial records are accurately maintained.
Why You Need a Professional Nonprofit Accountant
Managing nonprofit finances is not the same as managing the finances of a for-profit business. Nonprofits face unique challenges, such as:
- Fund accounting: This means keeping track of restricted funds (subject to limitations set by the donor) and unrestricted funds (can be used at the discretion of the organization), so that each donation is used as intended. It requires separate accounts, meticulous record-keeping, and regular donor communication.
- Grant tracking: Grant tracking involves tracking fund disbursement, keeping tabs on project progress, and, sometimes, meeting audit requirements. Proper reporting is key to compliance and ensures grants are spent according to donor specifications.
- Tax-exempt status: An accountant helps to navigate the rules and filing requirements that nonprofits must adhere to in order to maintain their tax-exempt status.
With nonprofit accounting services, you can offload the financial tasks while having peace of mind that your organization complies with applicable laws and regulations.
Benefits of Hiring a Professional Nonprofit Accountant
- Ensuring Compliance
Nonprofit organizations in Canada must follow strict financial rules set out by organizations like the CRA. A professional nonprofit accountant will keep up with the ever-changing regulations so your organization remains compliant. This is crucial for avoiding penalties and keeping your tax-exempt status intact.
- Accurate Financial Reporting
Whether you’re filing an annual report, preparing for an audit, or providing financial updates to stakeholders, accurate financial statements are essential. A professional accountant can help you set up your nonprofit accounting software to track income, expenses, and donations correctly.
They can also help with generating detailed financial reports, such as the statement of financial position (balance sheet), statement of operations (income statement), statement of changes in net assets, cash flow statements, and budget statements, all crucial for making informed decisions, understanding your organization’s financial health, and maintaining transparency.
- Streamlining Grant and Donation Management
Managing grants and donations, especially those that come with restrictions, can be time-consuming and complex. A professional nonprofit accountant helps you keep track of where every dollar is coming from and how it’s being spent. This includes keeping proper records of restricted and unrestricted funds to simplify donor communication and ensure funds are being used properly.
- Tax Filing and Planning
A nonprofit accountant will work with you to complete tax filings, such as the T3010 Nonprofit Information Return, accurately and on time.
- Improved Financial Strategy
An experienced nonprofit accountant doesn’t just handle nonprofit tax prep; they also provide business consulting and strategic financial planning. From budgeting to forecasting, a professional accountant helps set your organization on a path toward long-term sustainability by aligning financial decisions with your mission.
Nonprofit Bookkeeping Services vs. Nonprofit Accounting Services
While the terms bookkeeping and accounting are often used interchangeably, they refer to different aspects of financial management.
- Nonprofit bookkeeping services primarily focus on the daily financial tasks: tracking donations, recording income, processing expenses, and maintaining financial records. Bookkeepers ensure that all transactions are accurately recorded, which sets the foundation for the accountant to work from.
- Nonprofit accounting services, on the other hand, involve a more strategic approach, including financial analysis, tax reporting, and preparing financial statements. Accountants work with the data maintained by bookkeepers to provide insights and help guide the nonprofit’s financial decisions.
For an even more detailed breakdown, read our blog post – Bookkeeper vs. Accountant: Which One Does My Business Need? – Launchbury Accounting
Choosing the Right Nonprofit Accountant for Your Organization
When selecting an accountant for nonprofit purposes, there are a few key things to keep in mind:
- Experience in nonprofit finance: Ensure the accountant has experience with not for profit accounting and is familiar with the unique financial reporting and tax regulations that nonprofits must follow.
- Familiarity with nonprofit accounting software: Your nonprofit may already use nonprofit accounting software. Choosing an accountant who is familiar with the software you use can make for a more seamless integration.
- Location and accessibility: Working with a nonprofit accountant in Calgary or anywhere else across Alberta or New Brunswick means working with someone who understands the provincial and federal landscape. At Launchbury Accounting & Bookkeeping Solutions, we’re based in Alberta, but offer remote and mobile services. We have in-depth local tax knowledge and are happy to come to you when you need us.
- Full-service capabilities: Ideally, choose an accountant who can offer a full suite of services, from nonprofit bookkeeping services to strategic financial consulting. Having one trusted partner simplifies your financial management and enhances security.
The Bottom Line
Investing in professional nonprofit accounting services is one of the best decisions you can make for your organization. It ensures your financial records are accurate, your compliance obligations are met, and your efforts are supported by sound financial planning.
Whether you’re just getting started or looking to optimize your financial processes, a professional nonprofit accountant can provide the expertise and peace of mind you need to focus on what matters most: advancing your mission.
Looking for a Nonprofit Accountant in Calgary, Canmore, and Beyond? We Can Help!
At Launchbury Accounting & Bookkeeping Solutions, we specialize in nonprofit accounting and nonprofit bookkeeping services for organizations across Alberta and New Brunswick.
Book a call today to chat about how we can help your nonprofit thrive!
