How to Set Up Financial Systems for a New Nonprofit

Starting a nonprofit is an inspiring journey—but it’s also a serious financial responsibility. Setting up strong financial systems early on will help you stay organized, accountable, and ready to grow. Here’s a step-by-step guide to building a financial foundation that supports your mission.

1. Open a Dedicated Business Bank Account

Never mix personal and nonprofit funds. Open a separate checking account in the nonprofit’s name. This protects your liability, supports transparency, and makes accounting much easier.

2. Set Up Your Chart of Accounts

The chart of accounts is the foundation of your bookkeeping system. It organizes your revenue, expenses, assets, and liabilities. Be sure to include accounts for donations, grants, fundraising income, program expenses, and admin costs.

3. Choose Accounting Software

Select accounting software that fits your budget and reporting needs. QuickBooks Online, Aplos, or Wave (for very small orgs) are popular choices. Look for features that support fund tracking, donor management, and nonprofit-specific reports like the Statement of Activities.

4. Establish Internal Controls

Put safeguards in place to prevent errors and fraud. Examples include requiring dual signatures on checks, separating financial duties, and having regular oversight from the board or a finance committee.

5. Build a Budget

Start with a simple annual budget based on your expected income and expenses. Align your budget with your mission and goals, and revisit it regularly to make adjustments.

6. Track Restricted vs. Unrestricted Funds

Some grants and donations come with strings attached. Use your accounting system to track restricted funds separately from unrestricted income, so you always know how much is available for general use.

7. Set a Schedule for Regular Bookkeeping

Update your books weekly or monthly. Don’t wait until the end of the year! Regular maintenance helps you catch errors early, stay compliant, and provide real-time reports to leadership or funders.

8. Prepare for Tax and Compliance Requirements

Even tax-exempt nonprofits must file annual returns (usually Form 990). Stay on top of deadlines, registration renewals, and reporting requirements for your state and funders.

9. Educate Your Board on Their Financial Role

Your board has fiduciary responsibility. Make sure they receive financial reports, understand them, and participate in key financial decisions. This builds transparency and accountability.

10. Consider Hiring a Professional Early On

Even part-time or project-based support from a bookkeeper or Fractional CFO can give you peace of mind. They’ll help set up systems the right way and keep you from making costly mistakes down the road.

Starting with the right financial systems sets your nonprofit up for success. It shows funders, board members, and your community that you take your mission—and your money—seriously.

Need help getting set up? I work with new and growing nonprofits to build simple, scalable systems that support long-term impact.

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