Nonprofit accounting software contains industry-specific functionality developed to meet the accounting needs of the nonprofit sector. As opposed to a general-purpose accounting solution, nonprofit accounting software helps nonprofit organizations (NPOs) manage fund sources and further their organization’s mission by properly using available funds.
For NPOs, most operating expenses are entirely made up from funds, grants, and donations. A tailor-made solution to account for funds received and allocation within those funds as well as grants and donations.
Nonprofit accounting software options allow nonprofits to accurately manage the complex accounting needs for organizations of any size. Rather than depending on a general-purpose accounting solution, organizations prefer using nonprofit accounting software for industry-specific functions, primarily fund accounting and the collection of donations.
Here’s a breakdown of the ways these functions meet the needs of an NPO:
|Fund Accounting||NPOs are responsible for keeping detailed records of their donations, funding sources, and earnings. Without meticulous recordkeeping, NPOs can be subject to audits, fines or other legal consequences. Nonprofit accounting features enables NPOs to fully manage their sources of funding, ensuring every dollar and donor is accounted for and that their accounts are accurate through proper bank reconciliation. This includes the management of online donations or foreign sources, which must be reported along with an NPO’s main funding.|
|Reporting||Earning and expense reports can be developed and compiled to fully account for an organization’s funding, complete with detailed filtering options using transaction codes. Financial statements and reports can be exported in different formats, including CSVs, Microsoft Excel files, and PDFs, for use across departments.|
|Donation management||Nonprofit accounting software tracks donations and pledges from donors and fundraising campaigns. Donation management tools allow NPOs to measure and anticipate inbound donations, process recurring donations with ACH or credit card payments, corporate donations, matched gifts, individual giving and any other source of contributions.|
|Grant management||From start to finish, nonprofit accounting software can keep track of an application’s status. When grants are awarded, funds can automatically be distributed to designated departments.|
Many nonprofit organizations try to reduce or eliminate costs, since the priority is making sure any and all funds gathered are spent on your mission or on building up your organization to have a wider reach.
Unfortunately, you’ll be hard-pressed to find many nonprofit accounting software options out there. Most free accounting solutions are intended to be used by small businesses rather than exclusively by a nonprofit organization. Because of this, they may lay out their program to talk about income and profits; something that may be confusing for a part-time or volunteer employee to work-around.
Nontheless, we’ve done our research and have compiled a short list (in no specific order) of some of the free accounting software that should work for your nonprofit organization.
This free online accounting software for nonprofits provides the basic financials needed to operate small charities, clubs, HOAs, youth sports organizations, and more. The software is intended to be used by volunteer level treasurers and offers a simple design for easy bookkeeping with budgeting and reporting features.
Nonprofit Treasurer also has a “Payments” feature that allows organizations to accept credit card payments online. This is accomplished by creating a website page dedicated to collecting payments from members or donations from supporters.
Wave is a free financial software intended for use by small businesses. While not specific to the nonprofit industry, the software will be able to provide:
A nonprofit who is looking to be cost-concious will want to take note that with Wave, their payments feature does change 2.9% plus 30 cents per transaction, and 1% of all ACH transactions. Their is also a cost to running payroll, which starts at a $20/month base fee plus $4 per active employee.
Organizations looking to make a dependable investment into nonprofit accounting software should analyze the pros and cons of multiple software options to ensure they are making the right choice.
Below are some of the top nonprofit accounting software we’ve helped interested buyer’s evaluate:
Blackbaud is a market-leader in the nonprofit sector, and the Financial Edge solution is their primary nonprofit accounting software. The cloud-based accounting solution allows nonprofits to assemble detailed financial reporting, monitor and track the success of grants and programs and produce robust fundraising campaigns.
Abila has become a household name for nonprofit accounting and fund accounting alike. The solution was originally developed by Micro Information Products (or MIP) back in the 80s as a fund accounting tool. As the solution grew into a complete Nonprofit series, it was acquired by Sage in 2001 to be their answer to an increased demand for a nonprofit product. After undergoing name changes (Sage MIP Fund Accounting, Sage 100 Fund Accounting), it was acquired by Accel-KKR in 2013 and became what we know today: Abila MIP Fund Accounting.
Aplos provides a variety of products that aid in your nonprofit accounting efforts, such as their fund accounting options which can provide a number of advanced financial reports.
Our recent fund accounting buyer trends report found the reasons NPOs buy nonprofit accounting software and their most desired features. By analyzing over 500 notes from discussions with NPOs of all sizes, we identified key purchasing trends to help NPOs make the best purchasing decision:
Small nonprofits: Start-ups and other small nonprofit organizations will want to ensure their basic needs are met while keeping costs down. This includes tracking your basic income and expenses in a general ledger, managing your money via bank reconciliation, and having proper reporting to stay compliant with the IRS.
Industry-specific solutions (software developed with nonprofits in mind) can start around $75/month. Businesses wanting to stay below that total may need to consider a more generic software such as Xero or Sage 50c.
Mid-sized organizations: If you receive any funds or grants and need to ensure expenditures can be allocated to them appropriately, you’ll want to ensure your software has fund accounting functionality. Your organization may also be growing in size and adding on paid staff members (rather than being fully volunteer ran), meaning payroll is a feature you can no longer ignore.
Both fund accounting and payroll are pieces of functionality that can be bought as stand-alone or add-on software features to exiting accounting packages. Looking for a fully integrated (all-in-one) option will be the better long-term option to avoid integration issues and paying multiple software vendors a month.
Large NPOs: Larger organizations will look for enterprise level software with advanced accounting features with large donor management databases. This level of organization will want to ensure board members have full clarity of the organizations finances through proper cash management and reporting. Forecasts will be far more important to predict the health of your organization into the following year.
Larger organizations will put a heavy focus in fundraising campaigns and want to ensure their donors are being nurtured and taken care for to ensure continued support.
Though all NPOs are different, many that rely on similar software solutions encounter the same pain points. Here are some common bottlenecks to efficiency in nonprofit accounting software:
QuickBooks Online can be used by a nonprofit organization, but you’ll want to make sure your staff can put up with the “for-profit language” of the program. As pictured, the dashboard has mentions of profit and loss, sales, and other terms not commonly used in nonprofit environments.
Intuit previously offered an industry-specific version of QuickBooks built exclusively for nonprofits. However, as software solutions have migrated into the cloud, Quickbooks no longer offers a specific standalone piece of nonprofit accounting software. Current versions of Quickbooks must instead be customized to enable nonprofit-specific functionality. For organizations, this requires savvy Quickbooks experts who are capable of customizing the software to meet their organization’s particular need. Many NPOs instead look to adopt new nonprofit accounting software solutions that work out of the box.
For organizations set on sticking with what they know, Intuit has been recommending QuickBooks Online as the solution to have for nonprofits. The solution has one of the lowest cost of entry points starting at $15/month.