Top 7 bookkeeping mistakes

Top 7 Bookkeeping Mistakes Nonprofits Make (and How to Avoid Them)

Running a nonprofit comes with unique challenges. Your mission drives your work, but behind the scenes, bookkeeping can make or break your ability to stay compliant and financially healthy. Here are the top seven bookkeeping mistakes nonprofits often make—and how you can avoid them.

1. Mixing Restricted and Unrestricted Funds

Donors may designate funds for specific purposes, and these must be tracked separately. Failing to do so can cause compliance issues and erode donor trust.
Solution: Set up clear categories in your accounting system to track restricted versus unrestricted income.

2. Poor Recordkeeping of Grants and Donations

Not keeping detailed records can lead to confusion and missed opportunities.
Solution: Record every grant, pledge, and donation with details such as donor intent, restrictions, and acknowledgment letters.

3. Forgetting to Reconcile Bank Statements

Skipping reconciliations makes it harder to catch errors and fraud.
Solution: Reconcile monthly without fail—this helps keep records accurate and up to date.

4. Not Tracking In-Kind Donations

Nonprofits often overlook donated goods or services, but these must be reported properly.
Solution: Track in-kind donations with fair market value and list them in your financial statements.

5. Misunderstanding Your Accounting Software

You don’t need a nonprofit-specific accounting program to stay compliant. Systems like QuickBooks can handle nonprofit accounting effectively—as long as they’re set up and used correctly.
Solution: Customize your accounting software to fit your nonprofit’s needs and ensure proper tracking of funds, grants, and donors.

6. Failing to Maintain an Audit Trail

Without documentation, you’re vulnerable in an audit.
Solution: Keep a strong paper—or at least virtual paper—trail to support every transaction and booking. Organized records make audits smoother and help prevent costly errors.

7. Not Working With a Professional Bookkeeper or Accountant

Trying to do it all in-house often leads to costly mistakes.
Solution: Work with a professional bookkeeper or accountant who understands nonprofit accounting requirements and can help your organization stay compliant and financially strong.

Your mission deserves strong financial support. By avoiding these mistakes, your nonprofit will be in a stronger position to grow and serve your community.

👉 Need expert nonprofit bookkeeping support? Contact Glass & Associates today for a free consultation.