Many nonprofits rely on multiple tools to track accounting and finances. Using spreadsheets, disparate software, and even manual systems like catching receipts in baskets and entering them when you remember to do so can only support a nonprofit for so long.
Maybe you’ve moved beyond spreadsheets and into the realm of small business accounting software such as Quickbooks, but it’s no longer adequate to handle the complexities of the various funds your nonprofit needs to track. If your nonprofit is growing, there will come a time when you outgrow your antiquated systems and need software designed for nonprofit accounting. How do you know when you’re ready for fund accounting software?
Below are the top 10 signs you’re ready to move on to something more robust.
1. You receive funds with restrictions.
Large donations, grants, and other funds given to your organization with restrictions require sophisticated tracking and reporting. Only fund accounting software offers the level of sophisticated tracking nonprofits need.
2. Measuring the performance of a program or an activity is essential to you.
Nonprofits who value measuring the performance of specific programs find that fund accounting offers the detail-level tracking needed to understand the financial benefits of a specific program.
3. You need to report for different periods or fiscal years.
While your nonprofit may run on a specific fiscal year, that time frame may not align with those of your grantors and foundations. They may require reports based on different time periods. Fund accounting provides a flexible approach to reporting that enables you to run reports on varying time periods rather than a set fiscal year.
4. You need to record encumbered funds.
If you must record receipt of gifts as encumbered, fund accounting software is set up to do just this. Commercial accounting software does not.
5. You need to record allocations of indirect costs by grantors.
The allocation of elaborate indirect costs can be a headache in commercial software, but fund accounting enables you to enter it with ease.
6. Reports must be generated and submitted to each funding source.
Foundations, grantors, and private donors often require detailed reports to be submitted at agreed-upon milestones. Fund accounting makes it easier to run such reports based on specific criteria.
7. Nonprofit-specific accounting rules must be applied to your financials.
Not only are you required to utilize nonprofit accounting rules for your organization, but when these rules are changed or updated, your software must update too. Cloud-based fund accounting updates when changes are made so you continually use the latest software version.
8. Your organization must manage and report multiple budgets.
A typical business using commercial accounting software uses budgets for planning purposes. Nonprofits utilize budgets for compliance and monitoring. Fund accounting is designed with this in mind and gives multiple budget reporting options with automation features to streamline this process.
9. Transparency in how funds are used is vital to your organization.
Processing multiple balance sheets within a nonprofit isn’t uncommon. Funds are often treated as separate entities with their own general ledger. Commercial software can be cumbersome to set up for this, but fund accounting accommodates this nicely.
10. Your accounting software must work across multiple platforms.
Nonprofits often set up private gateways or access points into their accounting for auditors and others to review their information. It’s essential that your software functions smoothly across multiple platforms and integrates with other applications you may use. Fund accounting is created with this in mind.
Is it time to make a change?
There are many other good reasons to purchase new fund accounting software. Fund accounting software helps you manage multiple funds and streamline reporting with one package. Accounting and finance are included in basic fund accounting packages, but additional modules, from fundraising, donor management, timesheets, and human resources can also be included.
Dashboards and easy-to-use reporting tools are another benefit of fund accounting packages. Dashboards provides eye-catching, easy-to-understand data in the exact view you need for your role. Reports can be set up to be visible based on your settings and can be set up to automatically send to specific people, too! Board members and executive level employees need different information than managers, and dashboards and reporting give you the flexibility to build and share information based on your needs.
Lastly, fund accounting software provides you with ample opportunity for expansion. You can easily add more people to the system without hiccups or slowdowns. People can access systems from home, work or while traveling by logging in from anywhere you can access the internet. This feature improves data access, timelines, and security for your organization. Growing pains don’t have to be so painful that they hurt your nonprofit. With the right fund accounting software, your nonprofit can flourish. EMK Inc. is a fund accounting software consulting firm providing nonprofit and government agencies time-saving information that you need to help your organization. For more information, contact us online or give us a call at (888) 443-9399 .