Good intentions aren’t enough to keep a nonprofit’s books balanced. Whether it’s misreporting funds or missing reconciliations, accounting errors can harm credibility, delay audits, and even affect funding. Here are five common mistakes and how to avoid them.

1. Mixing Restricted and Unrestricted Funds

When restricted funds (such as grants or donor-specific contributions) are used for general operations, it creates compliance issues. Always track each fund separately in your accounting software.

2. Skipping Regular Reconciliations

Delaying monthly bank reconciliations can result in inaccuracies and surprises during audits. Schedule them consistently — even minor discrepancies can add up.

3. Incomplete Documentation

Missing receipts or invoices can cause reporting delays. Maintain a digital filing system and ensure all supporting documents are uploaded or stored securely.

4. Overlooking Internal Controls

Too few checks and balances can lead to errors or even fraud. Separate financial duties when possible — for example, one person approves expenses, another processes them.

5. Ignoring Financial Reports

Monthly reports aren’t just for auditors; they’re vital tools for your leadership team. Use them to assess progress, track program spending, and plan for the future.