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, using a tailor-made solution to account for donors and donations, fundraising operations, gifts, membership and other sources of funding is crucial to staying organized.
This guide offers information on the following topics:
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 three industry-specific functions: accounting, fundraising, and donor management. Here’s a breakdown of the ways these functions meet the needs of an NPO:
|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.|
|Fundraising||Nonprofit accounting software helps coordinate one of an NPO’s most essential functions: fundraising. No matter the size of your organization, fundraising functions can help keep track of donations, connect with donors, and maximize outreach and marketing campaigns.|
|Campaign management||Campaign management tools enable fundraising campaigns to execute highly targeted digital marketing plans. Campaign management tools utilize donor information to allow NPOs to utilize online donation forms. Tools that enable the creation of custom campaigns also allow NPOs to link together online donations and physical donations in a single system.|
|Campaign reporting||Detailed fundraising and donor analytics enable NPOs to put together custom reports to account for donations, grants, pledges and other sources of funding. Data-driven analysis lets NPOs measure fundraising performance, donor retention, and historical fundraising campaign success, painting a broad picture of the organization’s overall fundraising effectiveness.|
|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.|
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:
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.