Last updated on July 18th, 2022
Does your nonprofit organization seem to have some accounting challenges you just can’t get past? Many times these issues are related to either the accounting system or internal processes, such as properly segregating donor funds, allocating costs, or just keeping up with the ever-changing regulations.
There are multiple solutions to these problems, and most of them require the help of a CPA. A Certified Public Accountant (CPA) is a licensed accountant and trusted advisor who helps individuals, businesses, and other organizations plan and reach their goals. More specifically, some CPAs specialize in the nonprofit industry and train many hours a year to understand your sector’s problems.
What is a Nonprofit CPA?
You may have heard accounting referred to as the “language of business” because it deals with interpreting and communicating information about a company’s operations and finances.
Accounting is one of the most relevant branches to any company because this financial information, as interpreted by CPAs, allows executives and stakeholders to get the true story of the organization and thus make informed business decisions.
A nonprofit CPA works in or with a nonprofit organization and performs a multitude of services ranging from setting up an internal control system to budgeting and allocating resources and even fundraising. Most of the time, these services are finance-related but can cross over into many other operational aspects. There are also CPAs who specialize in nonprofit accounting and tax.
CPAs can often be involved in inventory management, donor database management, accounting system implementation, and many other roles. Whether this is an in-house CPA or an external accounting firm, CPAs go beyond their scripted job role and are commonly looked at as trusted advisors.
Using a nonprofit CPA at the right time can help take your organization to the next level. For example, a CPA can assist nonprofits in considering:
- State and federal regulatory requirements impacting the organization
- Does the accounting system produce useful information that can be used to meet legal and public requirements?
- Are donor-restricted funds properly segregated from unrestricted funds?
- Do we have a logical methodology for cost allocation between different functions of the organization?
What do you need a CPA for?
The considerations listed above cover some significant challenges nonprofits face, but there are many more not named. Every nonprofit has a unique set of considerations – and assessing each one is where a CPA can begin to provide immense value.
Many people consider CPAs to be trusted business advisors and more than simply the folks who come in to maintain the books. There are multiple roles a CPA can play in your organization, and you should choose the function based on your needs. One important consideration is whether to establish an in-house position or enlist the help of an external accounting firm.
If you need an in-house CPA, and this is your organization’s first financial position, you may want to consider either a CFO or a Controller to help manage cash flow and accounting practices. If your organization needs some additional support for your pre-existing finance leaders, you may consider an Accounting or Financial Reporting Staff or Internal Audit Staff.
These staff positions can help manage day-to-day operations and provide useful financial reporting for the organization’s leadership.
CPAs with an external accounting firm can also fill in-house positions. For instance, this is very common with contract CFOs – where an organization pays an external CPA for a certain amount of hours per month for consultation as the CFO. Similarly, another common role that CPA firms can fill is within the payroll and HR functions.
New nonprofit organizations may struggle with the implementation of an accounting system. Accounting software and ERP systems are so numerous; it can be hard to narrow it down for someone who isn’t financially savvy. Creating and enforcing a system of internal controls is another struggle faced by many organizations.
Maybe your organization already has these in place and is now preparing for an audit or to submit financial statements for a grant or loan application – these are all areas where a CPA can take the reins. If you need assistance with a financial statement or tax return preparation, or especially an external audit, you might be required to recruit an external CPA firm. Many firms specialize in these services for nonprofit organizations and can add a vast amount of value to your mission.
A common way to find a CPA firm is to look around your community. There are a lot of firms and individual CPAs that work with multiple nonprofit organizations – you may even be able to look at competitors and see the CPA they use. You may also know a CPA from a mutual organization or connection.
As you can see, there are innumerable roles a CPA can fill within your organization so those you choose to fill should be need-based considering your specific organizational challenges.
Why is a CPA worth it?
In the current climate, nonprofits face growing and challenging regulations, reporting, and accounting requirements. Knowing what’s required of you is one task but knowing how to track and manage everything accurately is a completely different problem.
CPAs that specialize in nonprofits are incredibly familiar with industry-specific problems and usually a good starting place for solutions. When recruiting the help of a CPA, an important distinction to note is that bookkeepers and CPAs are not the same thing. Hiring a bookkeeper can be a great solution to some problems, and while this may be right for your organization, there are some key differences.
Recommended Reading: Bookkeeper vs. Accountant vs. CPA – What is the Difference?
Nonprofit bookkeepers do not require specialized education or license. Bookkeepers can be useful for ensuring the day-to-day needs of the nonprofit are met, but sometimes don’t have the specialized education or experience to address the organization’s high-level strategic issues.
Nonprofit CPAs are licensed accountants – and to obtain this license requires a four-year degree along with many hours of continuing education every year. If your organization does have a bookkeeper, they typically will work alongside a CPA to provide the data needed to analyze finances, prepare financial statements, and address the strategic business issues.
Each position has its usefulness, and it may not be beneficial to pay one to do the other’s job. This is why it’s necessary to carefully consider what the true needs of the organization are. Sometimes it’s cut and dry, like if you need an external audit, but sometimes it’s not, like when you need the books cleaned up.
CPAs often go beyond their job description in a company and can provide an immense amount of value. Whether through preparing financial statements or solving donations tracking issues, the possibilities are endless.
The most important thing your nonprofit can do is consider the specific challenges you’re facing and knowing what’s required of you. If any are financial in nature, a CPA is likely a great starting place. If you don’t want or need an in-house CPA, enlisting the help of an external accounting firm is a way to get expert advice and cut costs. Either way, a nonprofit CPA can truly help take your organization to the next level.
Note: This is a guest post from Becker Professional Education. The author’s views are entirely his/her own and may not reflect the views of Ace Cloud Hosting.
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