For many nonprofits, a June 30 fiscal year-end means July kicks off not only a new reporting cycle, but a fresh opportunity to reflect, reset, and prepare for what’s ahead. Whether you’re breathing a sigh of relief or gearing up for an audit, now is the ideal time to close out the year thoughtfully.
At Chazin, we work with hundreds of nonprofits navigating this exact moment, and we know how powerful a strong year-end process can be for building trust, ensuring compliance, and setting your team up for mission-driven success. Below, you’ll find 10 essential steps to help you move into your new fiscal year with confidence:
1. Reconcile All Accounts
Start with the foundation: Make sure all Statement of Financial Position accounts are reconciled monthly. This includes accounts such as bank, credit cards, investments, prepaid expenses, accounts payable, deferred revenue, etc. Compare your books to your statements and/or external work papers and investigate any discrepancies.
As you are reconciling accounts, make sure the balances make sense. For example, accounts payable, per the trial balance, may match the vendor aging report. But if the balance is $500,000 when it’s normally $30,000, something may be wrong. When reconciled monthly, not just annually, this process sets the stage for accurate reporting all year long.
All receivable and revenue reports generated from donor management, membership, or registration software should be reconciled to the trial balance produced from the accounting software monthly. It’s important to ensure that reports generated from each system are for the same time period (i.e., have the same start and end dates).
Reconciling these reports monthly will save you a lot of time and cleanup later. It’s much easier to identify the cause of a balance discrepancy in a month of data vs. 12 months of data.
2. Review the Budget vs. Actual Report
Reviewing your Budget vs. Actual report is like a professional athlete reviewing the recording of their last game. They don’t wait until the end of the season to review footage; they study it right after the game. They analyze what didn’t work so they can improve, and they pinpoint what did work so they can replicate it. It’s a regular part of staying competitive. The same goes for your organization. The Budget vs. Actual report is the recording of your last game, or last month in this case. Reviewing this report monthly allows your organization to analyze unexpected shifts in performance so you can proactively react and regroup, and just as important, to identify what did work so you can replicate those strategies.
One bad game does not necessarily lead to a bad season. One bad month does not necessarily lead to a bad year, as long as you learn, adjust, and plan smarter for the months ahead. Then when you reach the end of the year, critically review the year in total. Take note of any major variances in revenue or expenses. Were they timing-related? One-time events? Just plain ol’ overspending? This insight is valuable for forecasting, communicating with your board, and creating a stronger, more strategic budget for the year ahead.
3. Accrue Outstanding Income and Expenses
Sometimes those unexpected budget variances (in section 2) have a simple explanation: income or expenses that haven’t been recorded yet. Even if the cash hasn’t moved, GAAP requires that you recognize revenue earned and expenses incurred within the period or fiscal year they happened.
The Statement of Activities is designed to show your organization’s financial profitability, without regard to cash. That means you need to account for the financial impact of any revenue earned or expenses incurred before year-end, even if the cash hasn’t come in or gone out yet. Accruals play a critical role in ensuring your financial statements reflect the organization’s true financial position.
4. Prepare and Close Journal Entries
Some financial transactions won’t come with a donor invoice or a vendor bill. Items like depreciation, internal allocations, and year-end adjustments are handled through journal entries—not standard invoicing or payment documentation. Before closing the books, be sure all necessary entries are recorded. Taking this final step ensures your financial statements present a complete and accurate picture of the year.
5. Assess Grant and Donor Restrictions
Grant and donor agreements are more than generous contributions; they’re binding contracts. When funding is designated for specific programs, projects, or initiatives, it’s considered restricted, and your organization is responsible for honoring those terms.
Take time at year-end to review all restricted funds (both temporary and permanent) to ensure they’ve been used according to donor or grantor intent. This includes confirming that net asset classifications are accurate and aligned with any stipulations.
6. Conduct a Physical Inventory (If Applicable)
If your organization holds inventory, schedule a physical count on the last day of the fiscal year or as close to it as possible. Reconcile that physical count with what your software indicates you have on hand. Investigate any discrepancies and then adjust the books to the actual count. This step supports strong internal controls and ensures your asset reporting is accurate.
It’s also important to review your fixed asset listing. Add any assets acquired during the year (ensure nothing has been inaccurately expensed) and remove anything your organization no longer has. If you manage a significant number of fixed assets, consider conducting a physical inventory of those items as well at year-end.
7. Document Board Resolutions and Major Decisions
Make sure your board meeting minutes are up to date and accurately reflect key decisions such as budget approvals, new policies, or major program changes. These records play a critical role during audits and compliance reviews, helping demonstrate transparency and good governance.
8. Review Internal Controls
Internal controls are to your organization what installing a Ring doorbell is to your home. They help safeguard your assets and ensure accountability. Just as you’d want to protect your home, nonprofits need systems in place to protect their assets. These systems are procedures designed to ensure that no single person has too much access or authority over financial transactions, and they are safeguards put into place to protect your assets.
If your organization faces budgetary or staffing constraints that make it difficult to separate financial responsibilities, there are still effective alternatives. Reviews of bank reconciliations, monthly budget vs. actual reports, and implementing procedures that ensure proper approvals of transactions all can help meet the same objective. Outsourcing some of your accounting functions also can be an effective way to segregate financial duties when staff resources are limited.
Year-end is a great time to take a fresh look at your internal controls. Are your policies around spending, approvals, and financial oversight being consistently followed? Are there any gaps or risks that need to be addressed heading into the new fiscal year?
9. Begin Audit or Financial Review Preparation
If your organization requires an independent audit or financial review, now is the time to get organized. Begin gathering key documentation, assigning internal points of contact, and coordinating timelines with your CPA or audit firm.
This preparation step is more important than ever now that the CPA workforce has shrunk significantly. According to the Bureau of Labor Statistics, the number of accountants and auditors dropped by about 10% between 2019 and 2024. As a result, audit firms are facing capacity challenges and are increasingly prioritizing clients based on factors like profitability, responsiveness, and organization.
What does that mean for you? It means that having clean books, clear documentation, and solid internal controls can make your organization a more desirable client. If you’re not ready when your auditors have you scheduled, you may find yourself scrambling to find another firm (and at year-end, that’s no small task).
10. Celebrate and Communicate Your Impact
As you wrap up the fiscal year, don’t forget to take a moment to reflect on your mission. This is a great opportunity not only to celebrate the progress you’ve made, but also to communicate that progress to those who make it possible: your donors and stakeholders.
Prepare your annual report or year-end communication by clearly highlighting your key achievements over the past year. Show how your financial stewardship has supported the work you’re doing, and make sure to demonstrate the tangible impact their support has had on your programs and services. This is where your financial statements really come to life, showcasing how each dollar has been used to further your cause.
Year-end tasks may seem daunting, but with a checklist and a little organization, these essential steps become powerful tools for transparency and planning. Strong year-end practices help build donor trust, ensure compliance, and position your organization for a successful new fiscal year. By taking these steps, you not only close out the year on a strong note but also set the stage for continued growth and impact in the year ahead.
Closing Out the Year with Confidence
At Chazin, we understand that nonprofit organizations have unique financial needs, which is why we emphasize the importance of transparency and thoughtful reporting. We work with you to ensure your financial reporting reflects your mission and aligns with donor expectations, helping you tell the story of your success in a way that resonates with your community and strengthens their trust in your organization.
We’re here to help guide you through these important steps, making sure your nonprofit is prepared for what’s next and ready to continue making a difference.
Share This Post:
Chazin
With over 20 years working exclusively with nonprofits, we pride ourselves in having a unique understanding of nonprofit accounting needs. We believe that nonprofits deserve personalized, quality service and should not settle for a one-size-fits-all approach. We collaborate with you to provide a fully virtual and customized solution that is not only cost-effective but also strengthens your accounting function. We offer a team of industry experts at your disposal to provide advice, leading technology, and to supplement existing staff to improve efficiency and compliance.