Why your Nonprofit should consider using Nonprofit Accounting Software?
By Jim Simpson, CPA and director, Financial Technologies & Management
Your organization like every other nonprofit is feeling the pressure to deliver more transparency. The demand for more timely information is coming from a multitude of interested parties: board members, major donors, potential funders, and watch dog organizations.
The goal of transparency can’t be easily accomplished without sound nonprofit accounting software-financial reporting is the foundation upon which transparency is achieved.
As the number of nonprofits have proliferated, accounting software is more tailored and can help manage these complexities. But taking the time to select the right software for your nonprofit is critical.
Before your purchase, start with a software evaluation and assessment to see if you’re a good candidate for nonprofit accounting software. The software evaluation and assessment will review your current system to determine its level or utilization and functionality. It is probably a good idea to perform a software evaluation any time there is a major change within the organization either positive or negative.
Here are eight reasons Nonprofit’s should consider Nonprofit Accounting Software.
- Flexible report writer for board and management financial reports needs
- Grants Management capability
- Budget Management capability
- Cost-allocation functionality
- Strong audit trails including account level and other security features
- Integration with payroll, fundraising, accounts payable automation, and other applications
- Expanded capabilities as organization grows to include advanced modules and donor and donation management
- Various financial segment or element tracking to include funding sources, programs, projects, locations, and other essential financial information. Funds can be setup as separate set of books that includes automate due to and due from capabilities.
Here are features and functionality of the software that can provide optimum efficiency.
The flexible report writer allows you to use the accounting software to meet the internal and external complex reporting requirements. Generating reports should be able to be varied to meet the board, program, and funder reporting requirements and easily modified to meet the changing program and funder needs. FASB and GASB compliant reporting is important to enable you to produce audited financial statements and related support schedules including the Statement of Functional Expenses and Schedule of Federal Awards.
The grants management capability allows you to track the financial results for each grant, and report back to the funder in the required format, using one accounting system. Grants management helps to insure maximum reimbursement and reconciliation to claims including encumbrances.
The budget management capability allows you to manage multiple budget versions for board approved version and projections. Easily make budget revisions and maintain budget trail to track various revisions. Budget management allows you to distribute annual budget monthly, quarterly, or annually.
Cost-allocation functionality allows you to easily allocate transactions on a real-time basis to multiple programs and funding sources all within the system. It should allow to you to pool various cost pools like facilities and overhead and allocate these to the various program and funding sources to provide a full-cost accounting. Allows the cost allocation basis like hours worked to be modified on a regular basis for more accurate funding source and program accounting.
Strong audit trails keep track of what users are doing within the accounting system. The system should allow you to provide your annual auditors and program monitors with the financial information they need to meet their requirements and reduce the chances of fraud. Those involved in the finance function should have segregated permissions in the accounting system to protect the organization and its staff. Strong audit controls include the ability for management to produce the audited financial statements and other tools to enable fraud detection and prevention. Security features including account level security and other features allow the organization to customize user access to the system.
As organizations look to be more efficient, it is important they look at software that allows them to integrate their critical functions like payroll, fundraising, human resources, accounts payable automation and other areas. Nonprofit accounting software typically has this functionality built into its various modules or it allows for third party product integration. It is typically modular based, which allows your organization to add functions and capabilities as the organization grows and needs additional tools. Most nonprofits need to perform donation and donor management so its important that the software has this capability as well.
One of the most important reasons to look into nonprofit accounting software is the ability track financial information different ways.
For example, an organization may want to track its various funding sources to see what funds are available. It may want to track my various programs and projects to see what the programs costs are and how the organization is doing financially. It might have various locations and want to know how each location is doing. It might have donor and endowments restricted assets and wants to do a separate accounting for these donations to know what assets are left and make sure donor restrictions are met. Each fund may need to be tracked as a separate set of books that includes automate due to and due from capabilities. Keeping track of revenue sources and generating reports for each source segment is critical to ensuring the success of an organization.
It is important, too, that staff remains efficient and effective, enabling them to focus on the long-term planning of the organization and not just keeping up with the day-to-day-accounting.
There are several purchase options that include direct purchase or subscription pricing to pay-as-you-go.
You will need to insure that you include software advisory services to include planning, implementing, and training. In some cases, you will need to also include data conversion and integration services.
Please contact us to help you determine if your organization will benefit from Nonprofit Accounting Software. We will help you with your software evaluation and assessment project.