A Practical Guide for Treasurers
If you’ve just been handed the role of treasurer or asked to “figure out the books,” you’re not alone. Most volunteer-run nonprofits operate with limited time, changing leadership, and a lot of responsibility resting on one person. “I’m just a volunteer” is a phrase I hear often. With the right tools and structure, it does not need to be as complicated as it sounds. This guide explains nonprofit bookkeeping, what it should like, and common mistakes that create future problems.
How Nonprofit Accounting Software Works
At a high level, nonprofit accounting software functions like a spreadsheet that connects directly to your bank account.
As transactions occur, each one is assigned a category (called an account). Once categorized, there is an option to create a variety of reports.
- Profit and Loss (P&L)
- Balance Sheet
- Trial Balance
Unlike spreadsheets, you don’t need to build formulas or reports manually. The system organizes everything for you, which is why accounting software is strongly recommended for all nonprofit organizations.
Do You Need Board Approval for Accounting Software?
In most volunteer-run nonprofits, the safest answer is yes. The more nuanced answer is it depends on bylaws, structure, and officer authority.
A typical process looks like this:
- The treasurer identifies issues with spreadsheets or current records
- The board approves researching or budgeting for software
- The treasurer presents options
- The board authorizes implementation
This protects both the treasurer and the organization by ensuring transparency and shared decision-making.
Who Is Responsible for Nonprofit Bookkeeping?
For small nonprofits, bookkeeping responsibility usually falls into one of three structures:
- Treasurer-managed: The treasurer handles all data entry and reporting
- Treasurer + assistant: Duties are shared to reduce workload
- Outsourced bookkeeper: A professional handles data entry while the treasurer oversees accuracy
Even when a bookkeeper is involved, the treasurer remains responsible for understanding the financial reports and identifying anything that looks incorrect.
You don’t need to be an accountant. You do need to recognize when something doesn’t make sense.
Understanding Categories (Chart of Accounts)
In accounting software, categories are called accounts, and the full list is your chart of accounts.
Every nonprofit will have a slightly different setup, but most include:
- Contributions / Donations
- Membership Dues
- Fundraising Income
- Program Revenue
- Expenses (supplies, events, operations)
If your organization sells merchandise, you may also have an income and an expense line for the following:
- Inventory purchases
- Merchandise sales
Common Mistakes to Avoid
1. Using the wrong account type
If income is accidentally labeled as an asset, it will show up on the balance sheet instead of the profit and loss report. That leads to confusing and inaccurate financials.
2. Creating too many categories
It starts innocently. Then suddenly there are 47 versions of “Fundraiser Income” and nobody knows where anything goes. It is appropriate to have some details, but the document being created is for the tax preparer. You tax preparer does not need to know the name of each individual fundraiser that made $100.
Keep it simple. You can always add detail later if needed.
What Financial Reports Do Nonprofits Need?
Most volunteer-run organizations only need to understand two core reports:
Profit and Loss Statement (P&L)
Shows income and expenses over a period of time.
This answers:
- How much did we raise?
- What did we spend?
- Did we run a surplus or deficit?
Balance Sheet
Shows assets, liabilities, and overall financial position.
This answers:
- How much cash do we have?
- Do we owe anything?
- What is our starting balance?
These are the reports typically used for Form 990 preparation and general board oversight.
What About the Trial Balance?
Some CPAs may request a trial balance, which is a more detailed internal report.
For most small, volunteer-run nonprofits, you do not need to actively use it. Your accounting software generates it automatically when needed.