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Why Nonprofits Need to Invest in Fund Accounting Technology

Why Nonprofits Need to Invest in Fund Accounting Technology

Nonprofit TechnologyWhen applying for grants, all nonprofits face fierce competition. A recent survey of nonprofit executives reported that a major concern among nonprofit leaders was the concurrent increase in demand for nonprofit services and decrease in available funds for services.

Accelerate Grants for fund accounting are available in 2015

Simply put – fewer grants means heightened competition among the nonprofits seeking grant awards.

The situation is particularly dire for smaller nonprofits. For any number of reasons, from general lack of funding to funding restrictions, smaller nonprofits have not been able to invest in fund accounting software.

Advocates of nonprofits (donors and volunteers) may not understand why fund accounting (accounting software designed for the specific needs of a nonprofit) is so important. This is understandable: fund accounting isn’t a common topic of conversation. It’s more interesting to talk about the impact that nonprofit is having on constituents and the community. However, fund accounting software is critical to winning the grant awards that fund the constituent and community services.

The reason fund accounting software is crucial to a nonprofit is that in addition to better financial management of the organization, fund accounting provides the necessary reporting the organization needs when applying for grants. Having a robust fund accounting systems ensures the funder that the organization has the ability to report as required were they to receive the grant.

A fund accounting system makes it easier to create grant-specific reporting regardless of the funding period whether across multiple fiscal years or multiple programs. Fund accounting software also allows integration to other systems for outcome reporting.

The cost of the software is usually the major hurdle in a nonprofit implementing fund accounting. Compared to commercial for-profit accounting systems the cost is similar if not less – but many nonprofits are using manual processes (spreadsheets) or entry level accounting systems (QuickBooks, Peachtree, etc.) and there is a big gap between the cost of entry level systems and true fund accounting.

There are ways to make the investment affordable. Nonprofits can approach major donors and seek a donation specifically for the software. There are also grants available. Currently, JMT Consulting Group is offering grants for fund accounting software. Accelerate grants will be awarded to 15 nonprofit organizations in 2015. Eligibility: organizations must be a 501(c)(3) and have an annual operating budget of less than $5,000,000 per their most recent IRS Form 990. Qualifying nonprofits may apply for the grants at http://acceleratenpo.com/services/application/

Another good listing for grants (of all varieties) can be found at the NonProfit Times. 

Equipped with fund accounting, nonprofits can enjoy several benefits:

  • Relieving the burden on the accounting team
  • Meeting the public demand for greater transparency
  • The ability to better manage and report on existing funding
  • The opportunity to improve the chances of being awarded new grants
  • Insight into program effectiveness
  • Better visibility into the financial health of the organization

The bedrock of sound management and operations is sound accounting. While fund accounting may not be the sexiest of topics, it is perhaps the most needed conversation a nonprofit and its board should have in mapping the future of the organization and the constituents and community it serves.

4 Responses to Why Nonprofits Need to Invest in Fund Accounting Technology

  1. […] Fund Accounting – Nonprofits need accounting built specifically for nonprofits. Spreadsheets and manual processes can thwart receiving grant awards. Accelerate #Grant  […]

  2. […] Fund Accounting – Nonprofits need accounting built specifically for nonprofits. Spreadsheets and manual processes can thwart receiving grant awards. Accelerate #Granthttp://dawnwesterberg.com/2015/01/28/fund-accounting-technology/ […]

  3. Bob says:

    Is there a good rule of thumb for when an NFP is large enough to need specialized accounting software?

    • Dawn Westerberg says:

      Hi Bob – for midsize accounting solutions $5 million and/or 5 grants. For entry level, I’d check out Aplos as a starter, and then if you encounter additional reporting requirements (beyond the scope of Aplos) look to the midsize solutions (AccuFund, Intacct, Abila, SerraFund, Blackbaud)

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