Nonprofits need to keep a close eye on their funds to stay on track with their expenses and income. Fund accounting software helps nonprofits record their daily transactions into specified funding categories. For example, your nonprofit may have a general fund, a project-based fund, and so on that tracks income. Expenses are recorded for grants, donor endowments, or special projects. A fund accounting software system needs to be set up, as it ensures your general ledger is clean and all expenses, income, and capital are being tracked accurately.
What are the Benefits of Fund Accounting Software?
Fund accounting software offers many benefits to nonprofits. First, fund accounting provides nonprofits with greater visibility to the public, resulting in your funds being an “open-book.” This provides the public with confirmation as to where funds are used and the financial health of your nonprofit. Donors and grantors want to be reassured their money is being used in the best way possible. This means they want to see your nonprofit following through, keeping your word, and continuing to fulfill your mission. They do not want to see your organization shut down due to lack of funds, especially since they did invest in your company.
When you use the correct fund accounting software, you will be able to better manage your accounting with ease. As you are managing each fund, you will clearly see areas you may need to increase your fundraising efforts, and areas you need to continue to invest and thrive in.
Organizations that gift grants to nonprofits want to know where, when, and how their money is being used. Fund accounting makes this easier and may also improve your chances of attaining more wanted grants for your nonprofit.
Set Up Fund Accounting Software for Your Nonprofit
The easiest way to track your funds is to set up your fund accounting software so it can start tracking funds within your nonprofit. Most software packages will allow you to set up specific general ledger fields. These specified fields can then be used to tag specific fund accounts in order to keep the general ledger clean and manageable. You can set up these fields when you install a fund accounting software program.
Best Practices for Fund Accounting
Once the steps have been taken to establish your fund accounts and you know what you have to work with, then you can start implementing best practices. A plan needs to be developed as how to aid low funds and use other funds more effectively.
A good fund accounting plan includes assigning accountability for the fund, relationship building strategies, fund solicitation strategies, and more. Basically, you have to know what money you have in each fund, and how you will continue to grow and nurture donor relationships to keep the funds coming in.
It is clear that fund accounting is more than just entering data into the general ledger. Fund accounting is about making accounting an essential part of your nonprofit’s planning and operations. Acquiring these accounting techniques will help you make the progress you’ve wanted for your nonprofit to achieve its mission.
RBP Methods is a nonprofit software and consulting firm that helps right-brained people navigate a left-brained world. We want to help you understand cloud-based fund accounting software for nonprofits. Whether you’re interested in AccuFund Nonprofit Accounting Suite, Abila MIP Fund Accounting, or other accounting software, we offer information, training, and support to help you manage your nonprofit accounting needs. Contact us today or call 503-648-9054 for more information.