All NGOs need a system for recording where money comes from and how it is used. Because NGOs finances tend to be closely scrutinized, it is important to put an effective accounting system into place to deal with the nuances of nonprofit bookkeeping and reporting. Seeking the help of an accountant who can help set up a bookkeeping system and explain how to use it is highly recommended. Board members or business schools may be helpful in finding a volunteer accountant or an inexpensive one specializing in helping in finding a volunteer accountant or an inexpensive one specializing in helping nonprofits get started. Often times NGOs have an accountant on the board who is familiar with these systems, which is also a useful option.

     It is important to decide whether the bookkeeping system should be cash or accrual. Cash based accounting is a system where:

• Revenue is recorded when added to a bank account.
• Expenses are recorded when money is withdrawn from the bank.

     This system is very straightforward. However, it only tells the the NGO how much money is in a bank account and nothing more. It does not reveal how much money might be owed to the organization or how much money the NGO owes.

     Accrual Based Accounting Records:

• Revenue that is earned (may be before or after it is received)
• Expenses when incurred (may be before or after payment)

     In general, it seems that the information provided through accrual based accounting is more useful to an organization than cash based accounting because it paints a broader financial picture. It allows an NGO to see not just its immediate payments and deposits, but also what kind of money they owe or may be receiving in the future. This allows an organization to be more aware of its financial status.

     Lastly, once the NGO decides what the bookkeeping system should be, it is essential that all financial transactions are documented and recorded into financial journals by the bookkeeper. Transactions should be numbered and put in chronological order and thank you notes are essential for every donation received. Thank you notes should be copied and added to the journals, as well as check stubs and deposits receipts. The bookkeeper must be well organized in order to prevent the misuse of funds and ensure efficient spending for programs.