Accounting practices in the nonprofit sector look slightly different than they do in for-profit business settings. Nonprofit accountants must be aware of the elements that make nonprofit accounting unique, such as record keeping and reporting. Instead of making money for a business, a nonprofit organization may raise money to cover overhead costs, fund programs and projects, advance specific causes and help those in need. Success is not measured by way of how much money is made. Rather, a nonprofit organization is successful when it fulfills its goals and overall mission.
When a nonprofit organization receives funding, the organization is required to track where the funding came from and how it is spent to achieve the organization’s mission. An online Master of Business Administration (MBA) in Accounting from Lamar University can help students gain practical knowledge in for-profit and nonprofit accounting, enhance their leadership expertise and advance their career prospects. The coursework for this online program focuses on topics such as advanced accounting, financial reporting and accounting regulations and practices.
How Nonprofit Accounting Is Different
Nonprofit accounting involves how an organization plans, records and reports its finances. The nonprofit organization follows procedures that keep it responsible to its contributors and donors regarding the allocation of funding and resources. Since nonprofit accounting focuses on accountability surrounding financial contributions, donors can set restrictions on the way donated funds are spent. These restrictions fall into three different categories:
- Restricted funds — The organization must spend these funds on specific programs. These funds have certain terms and special accounting procedures attached to them, and the money needs to be accounted for separately from other donations.
- Temporarily restricted funds — There is a time limit restriction on the spending of these funds. That restriction could include a requirement that the money be spent on specific projects. But, after the time limit expires, the organization has more leeway in how it spends the money.
- Unrestricted funds — The nonprofit organization can spend these funds as it sees fit to meet the organization’s mission.
For-profit businesses do not have the same restrictions as nonprofits regarding the accounting of their money and spending practices. Because nonprofits are so unique, their accounting processes need to keep track of the restricted funds via fund accounting.
Nonprofit Accounting Best Practices
To make sure that the bookkeeping and accounting processes are efficient and accurate, these best practices are recommended to accountants who manage the finances of a nonprofit organization:
- Use specialized, nonprofit-specific software — Nonprofit accounting software can accurately track, manage and record donations and expenses. Using the right tools can make comparing budget goals to funding income and spending much easier.
- Revisit the budget frequently — Checking the budget on a monthly basis can help keep the organization on track. By evaluating expenses, income and spending regularly, the nonprofit can be more successful in meeting its mission and goals. Being transparent and sharing budget information with board members can build trust and demonstrate efficiency.
- Gather a financial team — Using a team of people to review and track income and spending can ensure accuracy. Instead of having one person manage the entirety of an organization’s budget and accounting practices, responsibilities can be delegated to a group of people in order to corroborate and verify the nonprofit’s accounts.
What’s Next
Earning an MBA in accounting can prepare graduates for jobs in industries like healthcare, finance, information technology and insurance, as well as rewarding public-sector careers with nonprofit organizations or the government. Lamar University’s accelerated online program offers the in-depth study of risk analysis, corporate accounting, budgeting and forecasting. The courses are designed for flexibility, and there are multiple start dates to accommodate students’ busy professional schedules. The flexibility and convenience of online programs are important factors to consider for aspiring accountants interested in earning an MBA and advancing their careers.
Learn more about Lamar University’s online Master of Business Administration in Accounting program.
