Nonprofit fund accounting is about more than simply reporting on an organization’s income. Fund accounting gives nonprofits a clear picture of their financial health, reveals to donors how their funds are being spent, and helps organizations plan for future activities and events. Fund accounting plays an important role in nonprofit management, and understanding the basics of nonprofit fund accounting is essential to your organization’s success toward accomplishing your mission and goals. What many nonprofits don’t realize, however, is that nonprofit fund accounting can actually help you secure much-needed funds for your organization.
If you’re scratching your head at the above statement, you probably aren’t alone. For years nonprofit organizations have viewed fund accounting solely as an accounting tool, not a fundraising tool. Many nonprofits, however, are realizing that their fund accounting can actually help them secure more funds. Here’s how:
Nonprofit Fund Accounting Gives Donors the Information They Need and Want to Know
Most donors are initially drawn in by the particular work and purpose of a nonprofit or because they have a relationship with someone involved in the organization. However, these are not the reasons donors continue to give to the organizations of their choice. Well-invested donors want to know the following:
- How much of my gift will be used for overhead costs, and how much of it will be used for direct services?
- How well has the organization managed its funds in the past three years? Has there been a deficit? Do they provide financial information to their donors?
- If I make an unrestricted contribution, how will that money be used?
- If I specify that my gift should only be used for a specific program, how can I be sure that those funds are being appropriated to the right area?
Essentially, your donors want to know that you are a good steward of funds. Whether they donate $30 or $300,000, your donors want to ensure that you are using your funds responsibly and effectively. Consider providing full 990 forms on your website and include a section on your largest programs and funding for those programs. Many savvy donors will have served on nonprofit boards in the past, so they know a thing or two about nonprofit accounting. They will know that through fund accounting your organization can (and should) deliver a line-item detail that tracks every dollar that comes through your organization. They will be able to read spreadsheets, fund accounting reports, 990 forms, and audit reports to determine the financial health of your organization.
Wise nonprofit organizations pay close attention to what their donors want. Listen to your donors and provide the reports they request. If your organization has made fund accounting a priority and relies on accounting software for nonprofit organizations, this should be easy. Essentially all you will have to do is click a few buttons and run the requested reports. It’s as easy as that!
If your organization could use some help with fund accounting, give us a call today at (503) 648-9051. We’d be more than happy to help you review your current fund accounting processes and systems to ensure that you are providing your donors with all the information they need. More often than not, nonprofit organizations simply need to implement a nonprofit-specific fund accounting solution to streamline their fund accounting tasks and keep track of donated funds. Contact us today to learn more about our fund accounting solutions.
By proving that you’ve mastered the art of nonprofit fund accounting, your donors will be more apt to invest in the longevity of your nonprofit organization. Don’t let misplaced funds and ineffective accounting prevent your organization from raising the funds it needs to sustain its activities. Take the time to improve your fund accounting and watch the amount of available funds grow!