The Incredible Opportunity in Nonprofit Accounting

When Intuit first asked me to write an article about working with the nonprofit sector, I was a bit reluctant. You see, those of us who specialize in nonprofits know something other accountants and bookkeepers do not: the nonprofit world is an untapped goldmine, full of benefits.

When looking at which business sectors an accounting firm should concentrate in, nonprofit organizations can, and should, be held up to the same economic lens as any business. In fact, charities, social service agencies, arts organizations, schools, membership associations and even churches are ultimately businesses that happen to have a motive other than making money. Just because they aren’t there to make a profit does not mean that they aren’t a  profitable niche for your firm.

I think it all boils down to supply and demand, one of the basic economic tenets of our society. Let me explain.

The Demand

With more than 1.4 million nonprofits registered with the IRS, the demand for quality, solutions-oriented accounting is huge. Most of these organizations are small, but no matter how small they are, each one has a board of directors requiring monthly financial statements.

This is certainly not true for other businesses who usually don’t show up until April 14 and would never pay for monthly compiled financial statements. Because nonprofits frequently do not have the resources to hire staff to perform these functions, that’s where we come in!

Better still, most of these organizations survive on government and foundation grants that require an annual audit. This is true no matter how small the organization is, which can prove difficult financially. Nevertheless, an audit is a must in order for any nonprofit to be viable. Those of us who went to the trouble of getting those three extra letters after our name – “CPA” – find performing these audits actually quite lucrative and rewarding.

The Supply

On the other side of the economics is “supply,” and it’s low. As I said earlier, there is a real shortage of accountants willing to work with nonprofits. The biggest reason is the idea that somehow nonprofits won’t be able to pay going rates like other businesses can. As a result, only the largest firms seem to have staff trained in these areas. While it’s true that many nonprofits can’t afford the $300 to $500/hour rates these accounting firms demand, they certainly can and will pay the more reasonable rates the rest of us charge. Don’t forget – they need the service.

Another reason accountants give for avoiding nonprofits is that accounting for nonprofits is, well, just different than accounting for other businesses. For example, expenses must be reported on a “by program” basis in addition to the natural category of expense that accountants are used to working with. In addition, restricted grants require special handling. Learning how to deal with these and other small differences is easy, and while the accounting methods are different, they are not that different. I promise. Most state CPA societies offer one-day courses in accounting for nonprofits. Take one or two of these and you are ready to proceed.

High demand + low supply = Major Opportunity

In case the facts so far are not enough to convince you to work with nonprofits, let’s look at some other advantages. Unlike most businesses and individuals who are tied to a December 31 year-end, nonprofits can pick any time of the year. Many, actually, have fiscal years ending June 30 or September 30. This is great for the accountant because you can spread your workload out throughout the year instead of having it all concentrated in January through April. If  a nonprofit’s year ends on December 31, get them to change it. All the board needs to do is vote on it and there isn’t even a form to fill out. Completing a short year 990 information return is the only notification the IRS needs.

Another advantage is that once you have one nonprofit client, it’s easy to get others. The nonprofit community is tight. Executive Directors all know each other, and oftentimes board members serve on more than one board. Do a good job, and by word of mouth, the referrals will fall into your lap, and not just for other nonprofits. Don’t forget board members have an individual tax return to complete and many have their own businesses that need accounting work as well.

Of course I’d be remiss if I didn’t point out that most nonprofits are using QuickBooks®, which is always helpful. IntuitTM really didn’t make me say that; it’s just true.

Perhaps the Best Reason of All

I have saved the best advantage for last. People who work for nonprofits are typically in these organizations because they care about the communities they serve. Making money is not at the top of their list, so I think, as a result, nonprofit employees are just a nicer bunch of people to work with. I have certainly found this to be true.

There is one thing you can count on: Since most nonprofits  do not have taxable income, gone is the concern that suddenly they will be hit with a big tax bill and fault you, regardless of the fact they gave you no records during the year to process for tax planning. Sound familiar?

Choosing to specialize in the nonprofit sector has provided me with a thriving practice, as well as an enjoyable client base. Just try taking on one client. You will be glad you did and they will to. These guys need our help.

Editor’s Note: Several of Gregg Bossen’s videos on QuickBooks Made Easy for Nonprofits are located on YouTube. Here is an example of one video.