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Finding software can be overwhelming. We've helped many nonprofits choose the right nonprofit accounting software so they can record donations and set financial goals and budgets.
Here's what we'll cover:
What Is Nonprofit Accounting Software?
Common Features of Nonprofit Accounting Software
What Type of Buyer Are You?
Benefits of Accounting Software for Nonprofits
Market Trends to Understand
Recent Events You Should Know About
Nonprofit organizations, associations, churches and faith-based ministries face different challenges than their for-profit counterparts. Among these challenges are a nonprofit’s accounting needs. Rather than managing sales and revenue, nonprofits have to manage donor contributions, fundraising events, grants, investment income, membership fees etc. In addition, with limited funds for administrative tasks and strict reporting requirements, such as FAS 116 and 117, nonprofit organizations can save time and money, while reducing the likelihood of reporting errors, by implementing a nonprofit accounting system.
Nonprofit accounting solutions aim to help organizations manage their finances in both an accurate and transparent manner. These solutions should include accounting features that are specific to nonprofits and enable them to:
Identifying what type of buyer you are can help you choose the right solution. You should be aware of your unique needs and pay only for the features you deem necessary. Many buyers mistakenly pay for solutions that offer a plethora of features that they rarely use. Common buyers of nonprofit accounting software include:
Nonprofit accounting solutions provide organizations of all sizes the tools they need to manage income and expenses efficiently. As nonprofits are subject to federal audits, it’s important to accurately record all of an organization’s financial details. Therefore, these systems track an organization’s donations, grants, expenses, assets and transactions. Their focus in on maintaining a healthy balance between receiving donations and spending funds on welfare activities.
Similar to nonprofit accounting software, nonprofit financial software (sometimes called fund accounting software), helps achieve fiscal transparency, ensure federal reporting standards are met, maximizes donor dollars and minimizes unnecessary expenses.
Accounts in Blackbaud Financial Edge
These features work together so a nonprofit organization can make the most of their assets, maintain fiscal visibility, nourish their reputation and acquire lasting trust from supporters.
At the end of each fiscal year, nonprofit accounting regulations and end-of-year acquisitions and partnerships often become newsworthy topics. There is increased scrutiny around their operations and they are under pressure to ensure transparency, lest their funding be affected due to accounting inaccuracies.
Here are some important trends to know about:
Keep fund ledgers separate. Nonprofits must keep different ledgers for all of their fund sources: direct donations, grant monies, fundraising dollars, pledges etc. Nonprofit accounting software independently tracks fund sources and expense types, simplifying reports and ensuring accuracy.
Prioritize expenditures. Ledger reports provide a holistic overview of an organization’s financial landscape. This allows an organization to strategically prioritize future investments and upcoming expenses.
Document and meet budget goals. Having a holistic picture of an organization’s entire financial portfolio allows board members to create realistic budgets and meet associated goals.
Simplify tax preparation. Many nonprofit accounting solutions include features that prepare the Form 990—a tax form requiring certain federal tax-exempt organizations to file with the IRS.
Reinforce trust in your organization. Transparency in an organization’s financial data shows current and prospective donors how their dollars are utilized.
Prevent fraud or errors. Omissions or errors may occur due to internal deficiencies. Therefore, nonprofits should stick to the legal definitions of what constitutes contributions (revenues, gains, gifts or transfer of assets), donated services and expenses (fundraising and management).
Understanding these trends and taking appropriate steps can help a nonprofit organization maximize their available assets, ensure fiscal transparency, boost its reputation and build trust. The right nonprofit accounting software will address all of an organization’s accounting needs. Daily operations also have to be run efficiently, as the goal of a nonprofit organization is benefit the community in which they operate. For more information on software especially for nonprofit organizations, read our nonprofit buyer's guide.
FASB releases new accounting standards for nonprofits. The Financial Accounting Standards Board (FASB) updated the basic financial reporting model of nonprofits in August 2016. These revisions aim to provide better insight into nonprofits’ expenses and liquidity, investments and classification of their net assets. The new rules will give donors, creditors and others a more detailed picture of the operations and financial condition of nonprofits. The guidance will apply to all nonprofits, such as charities, religious institutions and private colleges and universities, which file financial statements based on generally accepted accounting principles.