Knowing When to Choose a Nonprofit-Specific Accounting Solution | npENGAGE

Knowing When to Choose a Nonprofit-Specific Accounting Solution

By on Aug 10, 2016



Nonprofit organizations are accountable to a variety of internal and external stakeholders. For this reason, it can be challenging to present timely, accurate data to external stakeholders while demonstrating fiscal responsibility internally. This can be especially true if your accounting solution is not designed for nonprofits.

Commercial accounting solutions may be an acceptable option for smaller organizations, but a larger organization will find it increasingly difficult to efficiently manage projects, grants, and restricted funds when accounting needs become more complex. In fact, nonprofits can spend surplus amounts of time on workarounds for processes that should be intuitively streamlined within their financial system. But, it doesn’t have to be this way!

Adopting a nonprofit-specific accounting solution can help your organization save time while meeting nonprofit accounting standards. In return, your staff will be able to focus less time on data entry and more time on your mission!

5 Reasons to Choose a Nonprofit-Specific Accounting Solution:

1. Track Data Through a Flexible Chart of Accounts

Nonprofit accounting is complex. Organizations are often juggling multiple projects based in different locations on various timelines. Revenue sources can be numerous—grants, donations, endowments—and when donors restrict contributions, these funds must be tracked and reported separately.

To effectively track data for internal and external use, your software needs to have a flexible chart of accounts. This provides flexibility to drill down to the project level in reports for better performance analysis.

2. Meet Reporting Guidelines

In order to maintain nonprofit status, organizations are required to comply with the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board (FASB). These principles include the following key requirements:

  • Organizations must track and report net assets based on restrictions set by donors (unrestricted, temporarily restricted, and permanently restricted)
  • Pledged funds must be recorded as income when promised
  • Expenses must be reported by function (programs, management and general, and fundraising)

If you’re finding it increasingly difficult to create reports that accurately meet these requirements, then it’s time to reexamine your financial system. Fund accounting software is designed so that nonprofit staff can easily meet these standards without worrying about compliance.

3. Manage Multiple Grants

It can be complicated to track revenue and expenses from various sources as your organization grows. This is especially true for nonprofits that are required to track and report revenue by fund type. Failure to show that contributions were spent according to donor requests can cause your organization to lose face and funds. With the right software, nonprofits can simplify this process by creating funds and assigning accounts in the General Ledger.

4. Increase Accountability with Internal Controls

Multiple individuals may be required to have access to your nonprofit’s accounting information. However, they don’t all need the same level of access. It is important to make sure the data you are working with doesn’t present a security risk.

Good fund accounting software gives you the ability to create logins for users and set access restrictions. This allows your organization to be more transparent without compromising important files.

5. Securely Access Data Files Anytime, Anywhere

Smart cloud technology makes it possible. The benefits of it seem obvious:

  • Constant access to information
  • Fast, flexible reporting
  • Nimble budget analysis
  • Streamlined project management

Fund accounting software with powerful cloud capabilities allows you to do all of this and more. Today, you need a solution that can handle the intricacies of nonprofit financial reporting and compliance. Fund accounting software is designed explicitly to meet these needs, so your staff can focus less on finance and more on making a difference.

To learn more, check out advice from one of our nonprofit product experts.



Angela Rockwell has served in many roles within the nonprofit sector including board member, grant writer, and event organizer. She was the general manager of F.A.R.M. Cafe—a grassroots, pay-what-you-can nonprofit restaurant located in Boone, North Carolina—where she worked alongside fellow staff and volunteers to provide nutritious food to community members, regardless of their ability to pay. Angela holds a Bachelor of Science in Sustainable Development from Appalachian State University with a concentration in Community, Regional, and Global Development.

Comments (1)

  • Ridha Fathima AM says:

    Thanks for the article on Knowing When to Choose a Nonprofit-Specific Accounting Solution.Looking forward for more articles like this.

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