1. Separate Business and Personal Finances
Establish a dedicated bank account for your organization. Mixing personal and organizational funds creates confusion, risks tax issues, and makes accountability difficult. A clean separation keeps financial records accurate and transparent.
2. Use Fund Accounting
Nonprofits and churches often receive donations, grants, or designated funds. Fund accounting allows you to track each source separately and ensure money is spent for its intended purpose. QuickBooks Nonprofit and Xero offer built-in tools to simplify fund tracking.
3. Record Donations Accurately
- Issue receipts for contributions
- Categorize donations (restricted vs. unrestricted)
- Track in-kind gifts (non-cash donations)
- Stay compliant with IRS donation reporting requirements
Accurate donation tracking builds donor trust and strengthens future fundraising efforts.
4. Maintain Detailed Expense Records
- Program expenses
- Administrative costs
- Fundraising activities
- Payroll and contractor payments
This breakdown helps with annual reporting, grant compliance, and board accountability.
5. Reconcile Accounts Monthly
Reconciliation ensures that bank statements match your records. This is a critical safeguard against fraud, errors, or misapplied funds. A monthly review helps leadership stay on top of the organization’s true financial health.
6. Prepare for Audits and Compliance
- Keep receipts and invoices on file
- Document board approvals for major expenses
- Use cloud-based bookkeeping software for easy access and record retention
Being “audit-ready” year-round reduces stress and demonstrates professionalism.
7. Leverage Bookkeeping Software
Software like QuickBooks Online for Nonprofits or Xero makes it easier to:
- Track donations and grants
- Automate payroll and expense tracking
- Generate financial statements for the board
- Provide real-time reporting to leadership teams
8. Work with a Certified Bookkeeper
Nonprofit and church finances are unique. A certified bookkeeper ensures accuracy and compliance by:
- Setting up fund accounting correctly
- Managing payroll for clergy and staff (with unique tax rules)
- Providing regular financial reporting for boards and donors
- Freeing up leaders to focus on ministry and mission
Conclusion
Strong bookkeeping isn’t just about keeping records—it’s about stewardship, accountability, and trust. Following these best practices ensures every dollar is tracked, every donation honored, and every financial decision supports your mission.
Schedule your free consultation today and see how Talbott Bookkeeping can support your nonprofit or church with reliable, faith-focused financial management.