Embedded Files
Management & Retention
Management & Retention
All nonprofits must meticulously maintain accurate records of all income, expenses, assets, and liabilities to support strategic planning, ensure financial transparency, and maintain donor trust. Both state and federal regulations require that the financial records of your nonprofit be complete, accurate, and consistent with Generally Accepted Accounting Principles, or GAAP. In fact, your board has a fiduciary responsibility to ensure your accounting records are accurate.
Why Proper Record Management is Essential
Legal Compliance: Nonprofits must adhere to specific financial reporting requirements to maintain their tax-exempt status and avoid penalties.
Donor Confidence: Transparent and accurate financial records build trust with donors and grantors by demonstrating responsible stewardship of funds.
Planning: Detailed records provide the financial data necessary for budgeting, and long-term planning.
Operational Efficiency: Understanding financial performance helps identify areas for improved efficiency and better allocation of resources to further the nonprofit's mission.
Key Records to Maintain
Financial Transactions: Detailed records of all donations received, expenses incurred, and in-kind contributions.
Assets & Liabilities: Documentation of asset acquisitions, improvements, disposals, and all forms of organizational debt.
Financial Statements: Regular reports such as monthly or quarterly balance sheets and profit and loss statements compared to the budget.
Supporting Documents: Bank deposit slips, canceled checks, invoices, receipts, time cards, and expense reports.
Organizational Documents: Constitution, bylaws, articles of incorporation, and annual reports.
Best Practices for Record Management
Meticulous Record-Keeping: Keep meticulous records of every financial transaction.
Regular Reviews: Conduct regular financial reviews and reconciliations to ensure accuracy.
Secure Storage: Implement a system for securely collecting and storing financial data.
Appropriate Retention: Adhere to the IRS guidelines for record retention, keeping records for at least three years, and longer for documents like incorporation documents and grants.
Utilize Accounting Software: Employ accounting software and a dedicated nonprofit bank account to manage funds effectively.
Generate Regular Reports: Produce monthly or quarterly financial statements to monitor budget adherence and financial health.
Seek Expert Guidance: Don't hesitate to seek expert guidance from professionals to ensure compliance and best practices.
Tips for Organizing Your Files
Whether you store your financial records digitally or by paper, knowing how to file them away in a method that makes sense will make finding and your annual reconciliation much easier. Files should begin with the fiscal year of operation, then for each activity on your banks statement should be kept by the month that transaction occured. Individual records should account for each transaction on the bank statement. See the sample image below of a file structure setup.
Here's some helpful tips:
Keep copies of reciepts either by scan, images, or photo copied and return originals to purchaser. Paper reciepts fade over time, so keeping a version that won't fade is important.
Pick a date to manage your paper files. If you store any paper, take time to file things appropriately right away, or plan a time to dedicate to sorting and filing things where you can find them again.
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