Why Nonprofits Need An Accounting System in Place

Nonprofit-Accounting-SystemAccounting is generally not the primary focus of nonprofit organizations. Nonprofit employees enter the sector to make a difference and impact their communities, not to crunch numbers. However, as donor and government requirements become more stringent, nonprofit organizations are having to spend more time in the accounting department and less time doing the activities they love.

In order to continue growing as an organization (not to mention keeping up with the numerous government and donor requirements), nonprofits need to invest in accounting software made specifically for nonprofit organizations. Because nonprofit organizations do not always grow internally at the same rate as their external growth, their software systems often fall behind and become outdated, resulting in inefficiencies and missed reporting opportunities.

In order to stay up-to-date with finances, answer important questions from the Board and government, and keep the organization running smoothly, accounting software for nonprofit organizations is a necessity. It helps nonprofit organizations meet financial requirements, keep track of their multiple funding sources, and create the necessary reports for their Board, donors, and supporters. With accounting software for nonprofit organizations, nonprofits can successfully manage their accounting requirements without having to sacrifice their program-related activities and mission.

In order to be effective, accounting software for nonprofit organizations must be implemented properly. More often than not, nonprofit organizations run their program off of poorly installed software systems and are not fully utilizing the features included within the accounting system.

If a Board member came up to you and asked you how much was spent on any particular program, could you answer their question accurately in a timely manner? Or say a funder is requesting information about how their grant money was spent… could you pull a report showing the information they are asking for? If you cannot answer the questions above for your particular organization, it may be time to reevaluate your current accounting system or invest in a new nonprofit accounting solution.

Finding this information should not take hours or days. With the right accounting software for nonprofit organizations, you should be able to click a button, pull a report, and pass on the information in a timely manner. Plus, the more time you spend trying to get answers from your organization’s accounting system means less time is being spent on mission-critical areas of your organization.

While it is not necessary for every nonprofit organization to have a CPA or accountant on staff, you do need someone to be in charge of the books (or in this case, the accounting system). Train specific people within your organization on your nonprofit’s accounting system and make sure that they are aware of all nonprofit financial requirements. Awareness of your organization’s financial standing translates into greater success down the road.

Keep the following in mind as you reevaluate (or reinstall) your accounting system or consider purchasing a new solution:

  • Make sure you have the right software. Your accounting system is crucial to your nonprofit’s success. While Excel spreadsheets may have worked in the beginning, as your nonprofit grows you will need a more robust accounting system that can track your dollars by account, funder, grant, and program.
  • Train your staff (or hire qualified staff). This step is crucial to maintaining accurate financial data. Your staff must know what is required of your organization as far as financial reporting and fund allocation. They also need to be trained on the accounting system in order to ensure that it is being utilized properly.
  • Get help if you need it. Many nonprofit organizations would rather do it themselves than hire somebody to help them get started. This is a costly mistake that could prevent your organization from performing at its top potential. If you need help implementing your accounting system or have questions about the process, consider hiring a software consultant who knows what they are doing. This will save your organization from making costly errors and wasting valuable time.

If your organization could use some help with your accounting software, give us a call today. We are experts in nonprofit accounting software and are more than willing to help in any way we can.