Nonprofit Bookkeeping: The Routine, the Rules and the Real Cost

Nonprofit bookkeeping is recording every dollar in and out, as a business would, plus three things a business does not have to do: track money by donor restriction, split expenses between program, administration and fundraising for Form 990, and keep records that satisfy funders. A small charity can do it in-house for the cost of software and a few hours a month. Outside help typically starts around $300 to $400 a month. In IRS data, charities with $250,000 to $1 million in revenue that pay an outside firm spend a median of $5,750 a year.

Most guides to this subject are written by firms selling the service, and they rarely mention what charities actually spend. We analysed IRS Form 990 data, set it against the prices firms publish, and read the rules at source: the IRS, the federal grant regulations and the accounting standards. Our own numbers and rules are below, followed by a monthly routine you can use.

What makes nonprofit bookkeeping different

Debits and credits work as they do anywhere. These are what change.

Money is tracked by restriction

Since ASU 2016-14, charities report two classes of net assets: with and without donor restrictions. A $50,000 grant for a youth program sits in the restricted column until you spend it on the youth program. Then you record a release, moving it to unrestricted. Propel Nonprofits’ guidance on restricted funds also explains a point that surprises people: an unconditional multi-year grant is generally recorded in full when the commitment arrives, so a charity can show a large surplus in year one and a deficit in the years it spends the money. Warn your board before they see it.

Expenses are split by function

The Form 990 instructions say 501(c)(3) and 501(c)(4) organizations “must complete columns (A) through (D)” of Part IX: total, program services, management and general, and fundraising. If your system does not allocate costs, the IRS allows “any reasonable method of allocation”, and you must “document the method of allocation in its records”. So write it down: for example, salaries by timesheet or estimated share of time, and rent by square feet. Set this up in your chart of accounts at the start, because rebuilding it at year end is what makes a Form 990 expensive.

Grants need their own trail

If you hold federal money, 2 CFR 200.302 requires records that “sufficiently identify the amount, source, and expenditure of Federal funds”, adds that “All records must be supported by source documentation”, and requires a comparison of spending with the budget for each award. Private funders usually ask for something similar. Code each transaction to a grant or a class as it happens, using a class or fund field in your software.

Donated goods and volunteer time are not cash

ASU 2020-07 requires in-kind contributions of goods and similar assets to appear on their own line in the statement of activities, with disclosure of how they were valued. Volunteer time trips people up, because your books and your 990 can differ. Under accounting standards, services are recorded only in limited cases, broadly when they need specialized skills you would otherwise buy. The Form 990 is stricter: its instructions say the value of donated services or use of facilities “may not be reported” on Part VIII line 1, even where your financial statements include it. Keep a count of volunteers regardless; Part I line 6 asks for it, and “a reasonable estimate” is allowed if you lack records.

What charities really pay for outside accounting

We looked at line 11c of Part IX, which is fees paid to outside firms and individuals for accounting and auditing, across 266,860 Form 990 returns from 501(c)(3) organizations in the IRS’s 2024 extract.

Our analysis of the IRS Statistics of Income extract; medians are among organizations reporting a fee. Three cautions. Line 11c includes audits and may include tax return preparation, so it is not a pure bookkeeping figure. An in-house bookkeeper’s wages are in salaries, not here. And the smallest charities, which file the 990-EZ or 990-N, are not in this data.

Two things stand out. First, a large minority pay no outside firm at all: 37.6% of charities under $250,000 reported nothing on this line. That is consistent with volunteer treasurers doing the books, and most small charities have no payroll to help: 73.6% of those under $250,000 reported no W-2 employees. Of those, 58.4% still paid an outside accountant, with a median of $1,700 a year. Second, compare the median with a monthly service. A non-audited charity in the $250,000 to $1 million range has a median of $4,250 a year. A service at $400 a month is $4,800, before any tax return. So full monthly outsourcing costs more than most charities of that size spend on all outside accounting, which suggests many use a cheaper mix: internal entry and an accountant once or twice a year.

In-house, outsourced, or a mix

• Under about 100 transactions a month, one bank account, no federal grants: a treasurer or part-time staff member can do this, with an accountant reviewing the year end. The risk is one person holding everything, so use the internal controls checklist.
• Several restricted grants, or the treasurer is overloaded: outsource monthly entry and reconciliation, and keep approvals in-house.
• Federal awards, or $1 million or more in revenue: you likely need a staff finance person or a firm that knows grant accounting, and a separate auditor.

A hybrid worth pricing: staff or a volunteer enter transactions, an outside bookkeeper reconciles and closes each month, and a CPA prepares the 990. Whichever you choose, the board stays responsible. The treasurer’s role is to review the numbers, whoever produces them.

Bookkeeper or accountant?

A bookkeeper records and reconciles. An accountant interprets, advises, and prepares or examines statements. The Bureau of Labor Statistics gives bookkeeping, accounting and auditing clerks a median of $50,670 a year, or $24.36 an hour, with some college typical. Accountants and auditors have a median of $83,680, or $40.23 an hour, typically with a bachelor’s degree. Those are wages across all employers in May 2025, not firm rates, and not nonprofit-specific. If a part-timer works for you, decide with care whether they are staff or a contractor: see hiring independent contractors.

What outsourced bookkeeping costs

Read from each firm’s site on 5 November 2026; we saw these in US dollars but our connection is outside the United States, so confirm your price. As an example from the most detailed price list, GivingArc quotes $400 a month for a charity with $201,000 to $500,000 in receipts and up to 50 transactions. Add restricted fund tracking at $100 and one to three grants at $75, and the total is $575 a month, or $6,900 a year. A full 990 is another $1,800 to $3,000, or from $1,500 if it keeps your books. Audit support is $1,500 to $5,000 a year. Numbers in Boxes starts at a higher level, and Bookkeeper360, Bench, 1-800Accountant and Pilot are general firms. Bench says it paused in December 2024, was bought within days, and resumed service in January 2025.

Firms that quote on request include Jitasa, Foundation Group, Certum and Your Part-Time Controller. To find others, Propel Nonprofits keeps a referral list, and asks organizations to do their own review of each. It does not do ongoing bookkeeping itself, but its services page lists a free helpline.

Ask any firm: Do you use fund or class tracking for restricted grants? Who does the release entries? Do you prepare the functional expense split? What is your 990 fee? What happens to my data if I leave? A general firm that cannot answer the first two is not set up for a charity.

The monthly routine

This is our own checklist. Neither Propel Nonprofits nor the National Council of Nonprofits publishes a monthly close guide we could find, so adapt it. A small charity should expect this to take a few hours.

1. Enter or import every bank and card transaction, with receipts attached.
2. Record income properly. Separate contributions, grants, event income and program fees, and mark any donor restriction. Match deposits to your donor system.
3. Code expenses to an account, a function (program, administration, fundraising) and, where relevant, a grant or class.
4. Reconcile every bank and credit card account to its statement. Someone other than the person paying bills should review it.
5. Release restrictions for grant money spent on its purpose or for time periods that have passed.
6. Run payroll entries and confirm payroll tax deposits; see nonprofit payroll software.
7. Compare with the budget, overall and for each grant. Our budget template gives the layout.
8. Produce statements for the treasurer: statement of activities and statement of financial position, using the financial statements template.
9. Lock the month in your software so that nothing changes after review.

Once a year

• Send 1099s by the January deadline, and confirm donation receipts went out.
• Review the expense allocation method and write down any change.
• Close the year with your accountant, and prepare the right Form 990.
• Ask whether you need an audit. Under 2 CFR 200.501, spending $1,000,000 or more in federal awards in a fiscal year triggers a Single Audit, for fiscal years beginning on or after 1 October 2024. The 2025 Form 990 instructions still say $750,000, so do not be thrown by the difference. States and funders set their own limits; see the nonprofit audit guide.

How long to keep records

From IRS Publication 4221-PC and 2 CFR 200.334. The IRS’s overall rule is that records are kept “for as long as they may be needed to document evidence of compliance”. Grantors, insurers, creditors and state agencies can require longer, so check your grant agreements. Scanned copies held in the cloud, with a backup, beat a box in a former treasurer’s garage.

Software, templates and automation

Bookkeeping software and accounting software are the same products. QuickBooks Online, Aplos and others are compared on price and fund tracking in nonprofit accounting software, including the free options and what they cost you in other ways. A spreadsheet can work for a very small charity with no restricted grants, if the chart of accounts is right, but it gives no audit trail, so it becomes risky quickly.

For templates, start with the chart of accounts, financial statements and budget. To automate, connect your bank and card feeds, use rules for recurring transactions, and have receipts captured on the card. Automation can suggest a category; it cannot know that a gift was restricted, so someone still has to review income. Keep a human check on anything an AI tool categorizes.

Common mistakes

• Spending restricted money on general costs, often unintentionally, because the bank balance looks healthy. A single bank account is fine; a single undifferentiated ledger is not.
• Cash-basis books with a large multi-year grant, which hide what is committed. Ask your accountant which basis suits you and how your funders want it reported.
• Treating a government or foundation grant as a sale, or recording event ticket income entirely as a donation. See nonprofit grants for how funders see this.
• One person doing everything: taking in money, recording it and reconciling it.
• Nobody reading the reports. Running a nonprofit means the board sees and questions the numbers every quarter at least.

Where these figures come from

The fee figures are our own analysis of the IRS Statistics of Income 2024 extract of Form 990 returns, 501(c)(3) filers with expenses above zero, using revenue on the same return for size bands. Audited means the return reported separate or consolidated audited statements. Rules were read at the IRS, eCFR and FASB on 5 November 2026, and firm prices on the firms’ own pages. This is general information and not accounting or legal advice. We take no referral fees from any firm named here.

Questions people ask

How is nonprofit bookkeeping different from regular bookkeeping?

The mechanics are the same, but a charity must also track donor restrictions, split expenses between program, administration and fundraising for Form 990, and keep records that show how each grant was spent.

How much does a nonprofit bookkeeper cost?

Published outsourced prices start at about $300 to $400 a month. In IRS data, charities with $250,000 to $1 million in revenue paying an outside firm spend a median of $5,750 a year on accounting. BLS gives bookkeeping clerks a median of $24.36 an hour.

Do nonprofits need a bookkeeper?

Not always a paid one. A volunteer treasurer can handle a small charity with few transactions, as long as someone else reviews the work. Multiple restricted or federal grants usually justify paid help.

Can I do nonprofit bookkeeping in Excel?

A very small charity with no restricted grants can, if the categories match Form 990. Spreadsheets lack an audit trail and become risky quickly, so most charities move to software as soon as they hold grants.

What is the best software for nonprofit bookkeeping?

It depends on your size and how many funds you track. QuickBooks Online and Aplos are common for small charities. Our nonprofit accounting software page compares prices and fund tracking.

How long should a nonprofit keep financial records?

At least three years from the return's due or filing date for most records, four years for employment tax, and permanently for your determination letter, governing documents and board minutes. Grants can require longer.

What is the difference between a nonprofit bookkeeper and an accountant?

A bookkeeper records transactions and reconciles accounts. An accountant interprets the numbers, advises and usually prepares the 990. An independent CPA firm performs an audit.

Should volunteer hours be recorded in the books?

Usually not as money. Accounting standards recognize services only in limited cases, and the Form 990 says donated services may not be reported as revenue on Part VIII line 1. Keep a count anyway, as Part I asks for one.

Where can I find nonprofit bookkeeping services?

Specialists include Jitasa, Foundation Group and GivingArc. Propel Nonprofits keeps a referral list. Ask how they handle restricted funds and functional expenses, and what they charge for a Form 990.

This is reference information, not legal or tax advice. Rules vary by state and change over time. For a decision that carries real consequences, check the current text at irs.gov or your state registry, and talk to a nonprofit attorney or CPA.