At Snyder Cohn, we work with over 120 nonprofit organizations—ranging from newly established groups to large, nationally recognized charities.

We continue to have conversations with clients about how new nonprofits can establish smart accounting practices from the outset. In this article, we’re highlighting a few key strategies to help streamline financial processes and enhance operational efficiency from day one.

Create the Ideal Chart of Accounts

We’ve addressed this topic before (click here to read more), but it continues to be a common and important area of focus for nonprofits. Unlike for-profit entities, nonprofits may rely heavily on contributions and grants—many of which come with donor-imposed restrictions. This makes compliance and transparency critical when designing the chart of accounts.

A well-structured chart of accounts for a nonprofit typically includes categories for restricted and unrestricted contributions and grants, as well as other revenue sources such as special events, membership dues, and program income—some of which may be subject to unrelated business income tax (UBIT). On the expense side, costs are generally categorized into functional areas like general and administrative, fundraising, and program services. This structure supports clearer reporting and helps differentiate between overhead and mission-driven expenses.

Such an approach simplifies the preparation of Form 990 and annual audits. Additionally, a nonprofit’s Statement of Financial Position often includes unique accounts like pledges receivable and distinctions between net assets with and without donor restrictions—key indicators of an organization’s financial health and available resources.

When setting up your chart of accounts, also consider the following:

• Accounting software: Many nonprofits use QuickBooks, which allows for the use of classes to track revenue and expenses by project or grant—avoiding an overly complex chart of accounts.
• Budget alignment: Make sure your chart of accounts aligns with your budget to support timely and accurate financial reporting.
• Grant readiness: If your organization currently receives—or plans to receive—federal or passthrough grant funding, a clearly organized chart of accounts is essential.

Automate the Bill Payment Process

Managing bill payments may not be top of mind for nonprofit founders, but establishing sound internal controls from the beginning is critical. Most new nonprofits are run by a small team, often with board members and staff working remotely. This can make it challenging to maintain proper segregation of duties and an efficient approval process.

Automating the payment process can help. Online bill payment platforms streamline invoice review and approval workflows, minimize manual data entry, and save valuable staff time. Many of these platforms integrate directly with accounting software, improving both efficiency and accuracy.

Digital solutions like BILL and Ramp are cost-effective tools that sync with platforms such as QuickBooks Online, Xero, and Sage Intacct. They also use AI to capture key invoice details—such as vendor, amount, and due date—reducing the risk of data entry errors. Invoices can be uploaded and approved digitally, making it easy for auditors to access documentation when needed.

These platforms also handle credit card transactions. For example, BILL Spend & Expense allows nonprofits to manage and document both bill payments and credit card activity in one place, simplifying reconciliation and improving audit readiness.

Protect Against Cybersecurity Threats

Cybersecurity may not feel like an immediate priority for a new nonprofit, but as organizations increasingly adopt cloud-based systems for accounting and bill payment, digital security becomes a critical concern.

Nonprofits are prime targets for cyberattacks such as phishing, ransomware, and social engineering. These threats can lead to serious consequences—including data breaches and financial losses. That’s why it’s important to take proactive steps to secure your systems and train your team.

Start by creating a cybersecurity policy that outlines clear guidelines for safe online behavior. You may also want to explore cybersecurity liability insurance, which can help cover losses related to attacks, including legal fees, data recovery, and operational disruptions. Ongoing staff training is also essential to stay ahead of evolving cyber threats.

These are just a few of the many factors new nonprofits should consider when establishing sound financial controls. Interested in learning more? Contact our nonprofit team at Snyder Cohn—we’re here to help you build financial systems that are efficient, transparent, and secure.

 

By: Rachel Zutshi and Sabeen Taha