2025

The Nonprofit Accounting Beginner’s Guide

The Nonprofit Accounting Beginner’s Guide

Jan 3, 2025 ericbuchholzComment

Nonprofit accounting is crucial for any organization that relies on donations and grants to fulfill

We’re going to indulge your fantasy and walk you through what might happen if you chose to ignore anything that resembles accounting. Spoiler: It won’t land you in jail, but it may leave you with a hefty price tag. Your company’s finances are left obscured If you put a full stop to bookkeeping, your books will no longer show a clear picture of your company’s financial viability. Without accurate records, it can be difficult (or nearly impossible) to track cash flow projections and statements. Without accurately measuring cash flow, you can obscure issues like overdue invoices, held inventory, or recurring variable expenses like shipping costs or hourly wages. A clear understanding of fixed and variable costs allows you to find out your break-even point. Your cash flow shows when money is coming in and what bills need to be paid. If your business is failing to track cash flow and you’re struggling financially, having a paper trail can reveal the problem. But, without bookkeeping there is no trail—just a stack of papers on a desk somewhere. Financing options become limited Need access to money fast? Your options are limited if you don’t have up-to-date books. If you ask the bank for a loan without detailed financial records, the answer will be a resounding no, and a cash advance might be your only option. Would you want to invest in a company that hasn’t updated their Cost of Goods Sold in six months, and is blind to their inventory and how much profit they’ve earned during that time? Probably not. Without evidence of your financial history, securing loans, bringing on investors or partners, or selling your business will be an uphill grind. Wave a sad goodbye to your hard earned money If you don’t organize your paperwork at all, money that should be in your pocket ends up in someone else’s. Here are some of the bottom line detriments of not doing your books. Your invoicing cycle goes astray You could keep a mental note of who owes you what, but we’re all human—we all make mistakes. Are you sure you didn’t forget about the invoice for the client who always pays late? If you did, they’re not going to voluntarily remind you that they owe you money. The slower you are at organizing outstanding invoices, the longer your business will go without those funds. Payroll problems start to rise If a system of checks and balances isn’t in place, issues with payroll can happen. Payroll records need to be up-to-date with staff paid on time—tracking benefits, leave time, expenses, and more, can be complicated if left unorganized. Without proper bookkeeping, you might be under-compensating (or overpaying) employees without knowing. Any errors on year-to-date earnings will be reflected in the employee’s W-2 form from your records and could cause tax problems for both of you. Managing expenses becomes tricky Having a shoebox of receipts might sound easy enough, but this is not going to save you money. Without proper bookkeeping, your business could suffer from slow leaks. Did you track those miles you drove two weeks ago to visit a client? Improper logging of expenses could lead to unclaimed tax deductions or an overstatement of expenses to the IRS—which is an issue if you’re audited. Let us take bookkeeping off your hands. Forever. Trusted by over 25,000 small business owners, see how Bench can help your finances with a personalized demo. Get your first month of books free when you sign up. Get Started Bookkeeping backlog drains your time (and costs you way more) If you have no bookkeeping system in place, is tax prep doable? Yes. But it’s an expensive time suck. Tracking down a year’s worth of records on your own takes you away from running the day-to-day operations of your business—and catch up bookkeeping can make a stressful time of the year even worse. If there isn’t a system in place for monitoring your books, your accountant is going to need ample time to sort through the mess, charging you an hourly fee that might cost a fortune. Don’t risk playing “catch me if you can” with the IRS If you’re on the IRS radar and you don’t have any bookkeeping practices in place, here’s a heads up. No, you won’t get thrown in jail by a scary IRS agent showing up at your doorstep. But your business could incur late fees and expensive IRS penalties. It’s a red flag for the IRS if your business: Fails to report income that has already been reported to the IRS (on W2s or 1099s) Takes suspiciously big deductions, like claiming 100% of your personal car use Wrongly classifies your employees Fails to issue information returns—W2s, 1099s, etc. Without up-to-date books, an audit will be a nightmare. Is that stack of papers on your desk looking scarier by the minute? In the event of an audit, you need to comply and provide sufficient proof of accounting records where necessary. Start bookkeeping, on whatever budget you have To avoid hurting your business, stay on top of your books. Hire someone to sweat the small stuff—which is actually pretty substantial when you lay it all out—so you can get back to running your company and steer clear of the glare of the IRS. If you’re not ready to outsource just yet, you can implement your own bookkeeping process and keep costs low. Not sure where to start? We wrote a guide on how to choose the right bookkeeping solution for your business.

What Happens If You Don’t Do Bookkeeping & Don’t Hire a Bookkeeper?

Jan 2, 2025 ericbuchholzComment

It’s easy to let the boring stuff (like bookkeeping and recordkeeping) pile up into an intimidating mess. What

Bench Accounting Abruptly Closes – Leaving 35,000 U.S. Customers Out in the Cold

Bench Accounting Abruptly Closes – Leaving 35,000 U.S. Customers Out in the Cold

Jan 1, 2025 ericbuchholzComment

Bench, a Canada-based accounting startup that offered software-as-a-service for small and medium businesses, has abruptly