What is nonprofit accounting?
Nonprofit accounting is a system of financial management, recordkeeping and reporting that is uniquely used by not-for-profit groups. Nonprofits are organizations that have no owners or ownership interests, Receive contributions or donations from third parties that don't expect a return.
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What is the difference between nonprofit and for-profit accounting?
Like any organization that handles cash flow and pays taxes, nonprofits should invest in professional accounting. Many nonprofit organizations don't allocate resources for a professional accountant to manage their finances. Instead, they assign the task to an untrained staff member or volunteer. Tiffany Couch, CEO of forensic accounting firm Acuity Forensics, says this is one of the biggest mistakes not-for-profit organizations make. Nonprofits run the risk of fraudulent activity if the bookkeeping and accounting is not carefully managed. This is often unintentional, through a lack of oversight or experience. Volunteers, who often make up a large part of a nonprofit's staff, may leave an organization with short notice, which can cause gaps in recordkeeping. Hiring a professional ensures that someone with training and experience is always paying attention to the accounts and may notice something that an untrained employee would miss. For example, many organizations meet the requirements that release temporarily restricted funds but don't realize it because no one is keeping track.