Nonprofit organizations face unique challenges in managing their finances. They must adhere to strict accounting standards while also ensuring that their funds are used in a manner that aligns with their mission. A well-crafted nonprofit accounting policies and procedures template can help organizations streamline their financial operations and reduce the risk of errors or fraud.
A nonprofit accounting policies and procedures template typically includes sections on the following topics:
Accounting Standards and Principles
This section should outline the accounting standards and principles that the organization will follow. These standards may include Generally Accepted Accounting Principles (GAAP), International Financial Reporting Standards (IFRS), or other industry-specific standards. The organization should also specify any deviations from these standards that it will make.
It is important to note that nonprofit accounting standards are continually evolving. As a result, organizations should periodically review their accounting policies and procedures to ensure that they are up to date. The Financial Accounting Standards Board (FASB) is responsible for setting accounting standards for nonprofits in the United States. FASB issues new standards and updates existing standards on a regular basis. Organizations should be aware of these changes and make sure that their accounting policies and procedures are in compliance.
In addition to following accounting standards, nonprofit organizations should also develop their own accounting policies and procedures. These policies and procedures should be tailored to the organization’s specific needs and should be documented in writing. The accounting policies and procedures manual should be reviewed and updated regularly to ensure that it is current and accurate.
Cash Management
This section should describe the organization’s policies and procedures for managing cash. This includes how cash is received, deposited, and disbursed. The organization should also specify any limits on cash balances and how excess cash will be invested.
Nonprofit organizations should have a strong cash management system in place to ensure that their funds are safe and accounted for. This system should include policies and procedures for the following:
- Receiving cash
- Depositing cash
- Disbursing cash
- Investing excess cash
- Reconciling bank statements
- Monitoring cash flow
Accounts Receivable
This section should describe the organization’s policies and procedures for managing accounts receivable. This includes how invoices are created, sent, and tracked. The organization should also specify any credit limits that it will extend to customers and how overdue accounts will be handled.
Nonprofit organizations should have a clear and concise accounts receivable policy in place. This policy should outline the following:
- Who is responsible for creating and sending invoices
- How invoices are to be tracked
- What credit limits will be extended to customers
- How overdue accounts will be handled
Accounts Payable
This section should describe the organization’s policies and procedures for managing accounts payable. This includes how invoices are received, approved, and paid. The organization should also specify any early payment discounts that it will take advantage of and how disputed invoices will be handled.
Nonprofit organizations should have a strong accounts payable process in place to ensure that their bills are paid on time and that they are not overpaying for goods and services. This process should include the following steps:
- Receiving invoices
- Approving invoices
- Paying invoices
- Taking advantage of early payment discounts
- Handling disputed invoices
Payroll
This section should describe the organization’s policies and procedures for managing payroll. This includes how employees are paid, how payroll taxes are calculated and withheld, and how employee benefits are administered.
Nonprofit organizations should have a payroll system in place that is accurate and efficient. This system should include the following:
- A method for tracking employee hours
- A method for calculating and withholding payroll taxes
- A method for administering employee benefits
- A method for paying employees
Conclusion
A well-crafted nonprofit accounting policies and procedures template can help organizations streamline their financial operations and reduce the risk of errors or fraud. By following the steps outlined in this article, organizations can create a template that meets their specific needs and helps them achieve their financial goals.
Nonprofit organizations should review their accounting policies and procedures annually to ensure that they are up to date and in compliance with all applicable laws and regulations. They should also consider having their financial statements audited by an independent auditor to provide assurance to donors and other stakeholders that their financial statements are accurate and reliable.
