WHY IT’S IMPORTANT TO HIRE A SPECIALIZED NONPROFIT ACCOUNTANT
A nonprofit organization differs significantly from a business organization in terms of goals, activities, and sources of income. Therefore, it also uses a different method to keep track of its finances. If you are running a nonprofit organization, it is strongly recommended that you hire an accountant who specializes in nonprofit accounting solutions.
DIFFERENCES BETWEEN NONPROFIT AND FOR-PROFIT ACCOUNTING
Balance Sheets
A for-profit organization usually prepares a balance sheet once every quarter. The balance sheet shows the equity of the company’s owner, which includes assets and liabilities. In nonprofit accounting solutions, there is no need for a balance sheet, because a nonprofit organization does not have an owner. Instead, a statement of financial position is compiled to calculate net assets.
Income Statements
Other than a balance sheet, a business organization also prepares an income statement every quarter. This statement lists the revenues, expenses, gains, and losses of the company, and it is used to assess financial performance. Instead of compiling an income statement, a nonprofit organization prepares a quarterly statement of activities, which shows its revenues, expenses, and net assets.
Tax Exemption
A for-profit organization is required to pay taxes on its net income, but a nonprofit may be tax-exempt. The IRS only assesses the secondary taxes of a nonprofit organization, such as real estate tax and sales tax, but it scrutinizes the income made by a for-profit, as well as its secondary taxes.
WHY YOU NEED TO USE A SPECIALIZED NONPROFIT ACCOUNTANT?
A normal business accountant with little or no experience or training in nonprofit accounting solutions will have to make significant adjustments in order to perform nonprofit accounting tasks effectively. The lack of knowledge and experience can result in an increased risk of errors and reduced efficiency. An experienced nonprofit accountant, on the other hand, has probably seen and handled all kinds of accounting challenges within the nonprofit context. As such, he or she will be able to provide reliable, accurate, and efficient nonprofit accounting solutions under most circumstances.
Accounting is a critical task that requires a high level of precision and expertise. Instead of taking a risk with a normal accountant, you will be better off hiring a specialized nonprofit accountant. For more information on how you can hire a specialized accountant for your needs click here.
