Nonprofit Bookkeeper vs. Accountant: What’s the Difference?

Sunday, March 10, 2024

When your nonprofit was just starting out, your executive director likely handled your organization’s financial tasks. This means they were essentially a bookkeeper and accountant on top of all of their other duties. As your organization grows and more complex situations arise, having a separate bookkeeper and accountant is essential to ensure thorough and accurate financial management.

However, it’s easy to confuse these two roles and their responsibilities. In this guide, we’ll clear up the confusion by covering the following topics:

• Nonprofit Financial Roles: an Overview
• Comparing the Nonprofit Bookkeeper vs. Accountant
• Hiring Nonprofit Bookkeepers and Accountants

Regardless of whether your bookkeeper and accountant are paid professionals or volunteers, you should know the difference between the two before you start recruiting. Let’s dive in with an overview of the different financial responsibilities nonprofits need to fulfill and who you should task with each one.

Nonprofit Financial Roles: an Overview

Although this guide will primarily focus on bookkeepers and accountants, there are four essential financial positions that your nonprofit should fill to cover its bases. Each of these professionals has different responsibilities and a different key word to associate with their work.

Here is a quick breakdown of these nonprofit financial roles:

• Your nonprofit treasurer is the main financial expert on your board of directors, and the word to associate with their work is oversight. Their duties include approving your organization’s financial policies and planning documents, developing risk management strategies, and presenting recurring reports to the rest of the board.
• Your chief financial officer (CFO) is either a full-time member of your nonprofit’s leadership team or an external professional hired on a fractional basis to work closely with your leaders. They’re responsible for tasks like forecasting cash flows and managing grants. The key word to associate with this role is strategy.
• Your nonprofit bookkeeper takes care of your organization’s day-to-day financial needs like tracking transactions, writing checks, and processing payroll. Their key word is record-keeping.
• Your nonprofit accountant is responsible for financial analysis at your organization—they take the information your bookkeeper records and draw actionable insights from it to improve your financial management practices. They also report your financial data in a variety of ways (more on this later).

Although these professionals have distinct duties, they also collaborate on many projects. For example, your CFO will typically take the lead on creating your organization’s annual operating budget because they’re in charge of strategic financial planning. But they’ll rely on data recorded by your bookkeeper and analyzed by your accountant to predict the coming year’s revenue and expenses, and your treasurer has to sign off on the budget before it goes into effect.

Comparing the Nonprofit Bookkeeper vs. Accountant

Since your treasurer is a board member and your CFO works with your nonprofit’s executives, their roles are relatively easy to distinguish. Bookkeepers and accountants are both professionals below the executive level who collaborate even more closely, so their duties can be more challenging to differentiate. We’ll spend some additional time breaking down their responsibilities to help you understand the difference between the two positions.

Nonprofit Bookkeeper

Bookkeepers don’t typically need any specialized education or certifications to do their jobs well, although they may find it helpful to have some basic training on how to use your accounting software. However, nonprofit finances operate differently from those of for-profit organizations, so your bookkeeper should have enough financial knowledge to effectively track multiple revenue streams and funding restrictions.

Your bookkeeper’s main duties include:

• Entering basic data. Bookkeepers record all of your organization's key expenditures, income, and other financial data in an organized manner within your accounting software.
• Writing checks. For example, a bookkeeper will pay rent, utilities, vendor fees, and other basic expenses using checks.
• Making deposits. Bookkeepers handle general bank transactions and record the basic information associated with them.
• Processing payroll. There is some overlap between nonprofit bookkeeping and human resources when it comes to payroll, but most small to mid-sized organizations allow this responsibility to fall to the bookkeeper.
• Allocating costs. Although your accountant and CFO will handle most of your nonprofit’s expense allocation strategy, your bookkeeper needs to have an understanding of functional expenses to ensure allocation goes smoothly in practice.

In general, a nonprofit bookkeeper is responsible for keeping records up-to-date and organized whenever funds change hands or new financial data is created. Bookkeeping is, in essence, laying the foundation for the accounting processes that follow.

Nonprofit Accountant

Unlike bookkeepers, accountants are required to have at least a bachelor’s degree in accounting or a related field, and many also pursue more advanced degrees. They also need to pass a specialized exam to be considered a certified public accountant (CPA). This is because the analytical duties associated with accounting are much more complicated and require a deeper understanding to be able to do well.

At nonprofits like yours, accountants are typically responsible for:

• Reviewing all of your organization’s accounts. Accountants make sure everything looks correct in your nonprofit’s accounts to get a better understanding of your financial situation and resolve any discrepancies that may arise.
• Balancing and reconciling transactions. In double-entry nonprofit accounting systems, bookkeepers typically record one side of a transaction at a time. Then, your accountant will ensure the debit and credit values for various transactions are balanced and match the information on your organization’s bank statements.
• Compiling financial statements. Nonprofits compile a standard set of financial reports each year, including the statements of activities, financial position, cash flows, and functional expenses. Your accountant will pull the data needed to create each of these statements and analyze the reports to draw conclusions about your organization’s financial health.
• Preparing for audits. If your nonprofit undergoes an independent financial audit for any reason, your accountant will help you choose the right auditor and compile all of the necessary documentation.
• Filing tax forms. Although your nonprofit is tax-exempt, you still need to file a federal tax return each year via IRS Form 990, as well as individual W-2s and 1099s for your organization’s employees and contractors respectively. Your accountant will ensure that all of these forms are filled out correctly and submitted on time.
• Analyzing operating budgets. As mentioned above, your accountant will analyze the financial data that goes into your nonprofit’s annual operating budget and review the budget before it’s finalized.
• Maintaining compliance. Both for-profit and nonprofit organizations are expected to follow the Generally Accepted Accounting Principles (GAAP) to promote transparency in accounting practices. Nonprofits are also subject to unique government regulations due to their tax-exempt status. As they analyze your nonprofit’s finances, your accountant will ensure your organization follows all of these standards.

Essentially, accountants look at the data recorded by bookkeepers, analyze it, and develop recommendations to improve your organization’s financial management practices. This is why your nonprofit needs both a bookkeeper and an accountant—accountants have the expertise to evaluate your finances that bookkeepers may not, while bookkeepers provide your organization with additional bandwidth to ensure accurate financial data collection.

Learn more about your accountant’s responsibilities in our Beginner’s Guide to Nonprofit Accounting.

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Hiring Nonprofit Bookkeepers and Accountants

The way in which you go about recruiting a bookkeeper and accountant will depend on your nonprofit’s financial needs and hiring budget. Let’s look at the different options you have and the steps for hiring these professionals in more detail.

Types of Nonprofit Bookkeeping and Accounting Services

There are three main ways your nonprofit could gain access to a bookkeeper and accountant, each with its own advantages and disadvantages. You could also use one method to hire your bookkeeper and a different one to hire your accountant, depending on your organization’s situation, time, and resources.

Here is an overview of the three types of nonprofit bookkeeping and accounting services:

• Hiring in-house. Very large nonprofits with complicated bookkeeping and accounting needs often find hiring full-time professionals to be the best option since they can focus exclusively on that organization’s needs. In-house bookkeepers and accountants tend to be highly motivated and turn around projects quickly. However, hiring and onboarding new staff members is expensive. Additionally, if they make any mistakes in your financial reporting, your nonprofit needs to be prepared to be held liable.
• In-kind donations. Small organizations that are just getting started with financial management may ask a local accountant to contribute their services pro bono and recruit a volunteer to do their bookkeeping. This option is completely free and helps new nonprofits establish professional relationships. But when bookkeepers and accountants aren’t paid, their motivation often fades, and they may choose to end their relationship with your organization so they can focus on paid projects.
• Outsourcing to an accounting firm. For organizations that aren’t among the largest or smallest nonprofits, outsourcing is the option that best balances access to bookkeeping and accounting expertise with cost effectiveness. It still provides consistent professional relationships, and the firm is liable for any mistakes, which often motivates them to produce high-quality work. The only drawback is that turnaround may take longer because the firm has many clients, but effective communication can help with this.

No matter which option your organization chooses, ensure your bookkeeper and accountant have experience working with nonprofit finances. Nonprofit bookkeeping and accounting are different from for-profit financial management in both purpose (ensuring transparency vs. maximizing profits) and practice. Your financial professionals need to understand these key differences to produce effective deliverables for your organization.

How to Hire a Bookkeeper or Accountant

Once you’ve chosen your hiring method(s) for your nonprofit bookkeeper and accountant, follow these steps:

1. Finalize your goals. Determine the top two or three responsibilities you need each of your professionals to fulfill so you can hire someone who is willing and able to complete those tasks.
2. Conduct online research. Look up nonprofit bookkeepers and accountants in your area, see what services they provide, and read reviews from past clients. Also, consider reaching out to other nonprofits in your network to see if they have recommendations.
3. Reach out to your top candidates. Narrow down your list, then set up a conversation with each of your top picks to discuss your goals and determine whether they would be a good fit for your organization.
4. Make your final decision. Keep your budget in mind as you do this, and establish a contract with your chosen partner before you start working together.

If you’re looking for an outsourced partner in nonprofit bookkeeping and accounting, Jitasa offers affordable, tailored services for both! Our team works exclusively with nonprofits and will rely on their years of experience to meet your organization’s needs and help achieve your financial goals.

Both a bookkeeper and an accountant are essential for your nonprofit to manage its finances effectively. With a thorough understanding of each role as outlined above, you can make the right decisions when hiring, soliciting in-kind donations, or outsourcing your bookkeeping and accounting services to find the right fit for your organization.

For more information on nonprofit bookkeeping and accounting, check out these resources:

• Fund Accounting 101: The Basics and Best Practices. Learn more about fund accounting—the unique system nonprofits use to track their finances—to get a better idea of the expertise you’re looking for in a nonprofit bookkeeper and accountant.
• Nonprofit Chart of Accounts: How to Get Started + Example. Discover a key organizational resource that both your nonprofit bookkeeper and accountant will leverage in their work: the chart of accounts.
• Bookkeeping and Accounting Services Exclusively for Nonprofits. Explore Jitasa’s outsourced nonprofit bookkeeping and accounting services in more detail to see if they would be a good fit for your organization.

See how Jitasa’s affordable, tailored bookkeeping and accounting services can work for your nonprofit.

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