If you are a part of a non-profit organization, you might find accounting and auditing your finances a really hard thing to do. Similarly to other profit-oriented businesses, an annual accounting cycle is followed by these non-profit organizations. To complete accounting tasks, financial reports and analysis are used to determine the financial status of the organization. The details in these reports are considered essential for the shareholders and authority boards, as well as state officials. These can be used in a variety of reasons, mainly for funding projects which are relevant to the advocacy of the organization.
There are two main parts of accounting for non-profits: bookkeeping and fund accounting. NPO's accounting department does this every year. Each of these two processes is very important to make sure that the status of the organization's finances is properly documented and accurately recorded. These aids both the parties concerned to identify any type of error in the finance reports of the organizations so these discrepancies would be fixed immediately. Thus, it allows for error-free, transparent and systematized financial reporting.
The process of bookkeeping particularly involves the documentation of all the transactions involving funds that NPO engaged in. For example, when the organization receives checks from grants and sponsorships, the team of bookkeepers and accounting department organize each check they receive and take note of their amounts, as well as where these amounts are appropriated. This system aids the team to keep track of all the financial transactions of the NPO and make sure they are used for the purpose they are originally allotted for.
For starters, any non-profit organization employs manual bookkeeping duties through journals, ledgers and checkbooks being updated by the accounting team by hand. However, as tasks get more complicated, a need for accounting software and automation is necessary. Most large-scale NPOs have already acquired accounting teams to automate their bookkeeping tasks. The computerized integration makes everything centralized. Thus, everyone with authority can access the file at once and can modify items real-time. The program and system installed in the company's accounting department generates and updates data every time an entry is placed. This allows for easier and more convenient documenting and reporting for the financial transactions of the non-profit organization.
All in all, hiring a bookkeeping and accounting firm to handle them is especially necessary for any non-profit organizations. With a lot of transactions involving money moving around, it is best to have a team of experts pose a system that works for accurate status of your organization's financial transactions.
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