A Guide to Nonprofit Year-End Accounting
Closing the fiscal year can seem like a daunting process. At Sutro Li, we understand that behind every financial need is a human need, and we're here to make this as straightforward as possible. This checklist addresses the nuances of accounting for nonprofits and contains the essential tasks to keep you on track in the months before and after your fiscal year ends.
General Guidance
Start Early: Aim to close your fiscal year within 60-90 days from the year-end. Coordinate your planning with your finance team, accountant, and auditor/tax preparer.
Audit Preparation: Complete your year-closing activities well before audit and/or tax preparation. Prepare "audit-ready" schedules as you close out the year.
Month and Year-End Closure: A solid process at month-close simplifies the fiscal year-end close. Similarly, a detailed fiscal-year closure simplifies your audit and tax preparations.
Pre-Year-End Tasks
Before the fiscal year officially ends:
Manage Cash Activity: Make all necessary cash transfers to allow for bank processing times so that necessary cash movement happens before the close of the year.
Plan for Bonuses: Schedule bonuses to be run before year-end.
Categorize Expenses Accurately: Assess all bills and expenses at the end of the fiscal year to ensure they are accounted for in the correct reporting year. Book bills for future-year goods/services to a prepaid account and create a prepaid schedule to note all items that need to be recognized in the future year.
Contact Your Vendors: Request all pending invoices, and give vendors a deadline to send invoices so you can book expense accruals.
Review Your Balance Sheet: Give your Balance Sheet a good review and update as many of your Balance Sheet schedules as you can. Review open Accounts Receivable and Accounts Payable items and follow up on any receivables or payables that are not current.
Update Your Restricted Net Assets Schedule: Include all new restricted grants from the year.
Post-Year-End Tasks
Once the fiscal year has ended:
Late Invoices: Make sure that invoices received in the new year for services rendered in the prior year are recognized in the appropriate period.
Petty Cash: Confirm the year-end petty cash balance.
Review Clearing Accounts: Review and clear any balances in your balance sheet's clearing accounts.
Grants: Have you received any grant award letters that need to be entered but might have been missed because they are not yet received?
Review Your Balance Sheet: Give your Balance Sheet a good review (again) and update as many of your Balance Sheet schedules as you can. Begin to prepare schedules to be final for audit or tax preparation.
Prepaid Expenses: Recognize expenses that were recorded as Prepaid in the prior year.
Organize deposits: When making deposits, separately group prior-year deposits from the current year. This makes it easy to find and enter income related to each fiscal year.
Discussion Topics with Your Accounting Team
Here are questions to help your accounting team understand your needs for year-end reporting. Share these within a month or two of the fiscal year-end before the fiscal year is fully closed.
Timeline: Are they on track for a close within 60 to 90 days?
Audit and Tax Filing: Has a CPA been chosen for audit and tax filing? Has an engagement letter been signed, and has the engagement been scheduled?
Reports for Funders: Do you have any funders with year-end requirements or reports due in the first fiscal quarter?
Closing Words
Every organization is different, so these are reminders, not an exhaustive list. Discuss this with your accounting team. With good preparation and proactive communication with your vendors and accounting firm, you’ll have a smooth process to lock the books!
If you need assistance or simply a second opinion,contact us at Sutro Li. It’s our mission to make the world a better place one great cause at a time.