Audits tend to make people nervous. Even seasoned nonprofit leaders feel that familiar tightness in their shoulders when they hear the word.
At JFW Accounting Services, we’ve seen clients start stressing at the “A” word. Anyone going through an audit wants to get it right, but not everyone is sure how to prepare for success.
Over the years working with nonprofits, we’ve learned that a clean and steady audit process is all about preparation.
A good audit gives your nonprofit confidence. It strengthens the trust donors place in you. It also sets the tone for your future financial decisions. If you prep the right way, an audit becomes less of a hurdle and more of a helpful check-in.
Let’s break down five steps that set your nonprofit up for a smooth and steady audit season.
Step 1: Start With Your Financial Records
This is where most of the heavy lifting happens. Your auditor needs a clear trail, and that starts with accurate books.
Begin by reconciling every account. That includes bank accounts, credit cards, investment accounts, and any cash your team handled through the year. If something feels off, address it now. It’s far easier to fix issues before an auditor spots them.
Next, take a close look at how your income and expenses are classified. Nonprofits have very specific reporting needs. Program activities, admin work, fundraising efforts; each must be placed in the correct category. Accurate classifications protect your financial story and help you comply with reporting expectations.
Step 2: Review Your Internal Controls
Your internal controls shape the way money moves through your organization. They protect your nonprofit from mistakes and misuse. They also show your auditor that you take accountability seriously.
Take a moment to assess how things went this year. Look at who approves expenses, who handles deposits, and who enters data. Ask yourself if the same person has been doing tasks that should be shared. You don’t need a big staff to create separation. You just need smart processes.
If you notice weak spots, update your policies or add a new safeguard. Even simple adjustments can strengthen your system.
Step 3: Prepare Your Reports and Schedules
Organization is key for any auditor. Keeping your reports organized and prepped speeds up the process and makes for fewer questions from your auditor.
Start with your financial statements. Make sure your Statement of Financial Position, Statement of Activities, and Statement of Cash Flows are ready. These documents tell the story of your year and set the foundation for your audit.
Then move into your supporting schedules. Your fixed asset list should show purchases, disposals, and year-end balances. Your grants schedule should outline what you received, what you spent, and what remains. Donation and pledge records should be clear and accurate.
Putting these materials together early saves time for everyone.
Step 4: Start Communication Early
Auditors can seem daunting to a nonprofit organization. We’ve seen so many clients stall out on starting to communicate with their auditor. We say, don’t be scared and start communication as early as possible.
So, where do you start?
- Confirm your audit schedule
- Review the PBC list that lets you know what documents you need prepared
- Tell your auditor about unusual transactions or leadership changes
Starting the process early with these processes alleviates stress and helps you stay calm and in control throughout your audit.
Step 5: Prepare Your Team for the Audit
Your audit’s success doesn’t just depend on you and your auditor. Your organization’s team also plays an important role in getting you through this moment.
Start assigning responsibilities early. You need someone to:
- Collect documents
- Answer questions
- Review information before it gets to the auditor
Once each team member has a role, you’ve prevented the risk of overlap and confusion. Next, walk your team through the process. Not everyone knows the timeline and expectations. Getting this information to your team encourages them to be open, responsive, and ready to keep a cooperative rhythm during the audit.
Why Hire an Accounting Service for Your Audit?
Sure, you could go through the auditing process on your own. But that takes precious time away from letting your nonprofit flourish in the community. Here’s why so many nonprofits hire a team like JFW Accounting Services to help get through the 5 preparatory auditing steps:
- Accountants stay on top of tax code and regulation changes. You’ll never see us surprised as we go through the auditing process.
- We can represent you directly. We can handle all communication between you and your auditor. Trust us to handle responses correctly and keep the ball rolling.
- We can work with you beyond the audit and help you maintain clean financials throughout the year.
- Audits can be time-consuming (between a few weeks to a year). You don’t need that stress on your plate while running a nonprofit. Working with an accountant frees up your time and speeds up the audit process.
Make Your Audit a Stress-Free Experience With JFW Accounting Services
Preparing for an audit isn’t about perfection. It’s about readiness. These five steps bring your nonprofit closer to a smooth, predictable audit season, giving you peace of mind as you plan for the year ahead.
At JFW Accounting Services, we’ve guided nonprofits through countless year-end processes, cleanups, and audits. We’ve seen how preparation transforms stress into confidence. With the right support and a clear process, your audit can feel less like a hurdle and more like a natural part of your financial rhythm.
Contact us today to schedule your free consultation.
