When your nonprofit is simply getting began, your funds for an accounting system is probably going very near $0. These low-cost instruments will be a good way to launch and acquire momentum, however there comes some extent for each nonprofit when the time it takes to handle your fund accounting workarounds outweighs the price of upgrading your system.
It might be time to search for a fund accounting system with subfund capabilities if you discover these three indicators.
Is your accounting software program not working to your group? Try our webinar, Obtained That Too-Small Feeling on QuickBooks? Assume Greater! for recommendations on how one can say goodbye to monetary reporting workarounds.
1. Your Chart of Accounts/Class Listing Turns into Unwieldy
Nonprofit accounting, and fund accounting basically, is all about monitoring, managing, segmenting, and reporting on particular person funds. Methods like QuickBooks will mean you can use a subject comparable to Class to phase your entries. However what they usually don’t do is mean you can handle your income and bills into these numerous segments on the finish of a interval. Understanding your income and bills by your fund phase, at its core, is what distinguishes nonprofit accounting methods from their for-profit counterparts.
If all you needed to fear about had been a single program or income stream, it will be comparatively simple to handle your nonprofit accounting in a for-profit system. However only a few nonprofit organizations solely must subdivide income and bills right into a single mission, fund, or program. You’ve got a number of revenue streams—donations, grants, service charges—in addition to all of the methods you utilize the cash. A few of these funds include detailed restrictions, additional complicating your monitoring.
If you happen to’re like most organizations—even ones with smaller budgets—you have to handle your income and bills by particular person funds, initiatives, packages, departments, and value facilities. Think about monitoring the income and bills of lots of of packages funded by scores of grants inside a dozen or so price facilities in a system like QuickBooks. It will require a lot effort and time—and doubtless multiple spreadsheet—that you just wouldn’t be capable of keep on prime of day by day information entry. And when you have to monitor these restrictions in a spreadsheet exterior your system, you introduce info silos and improve threat.
2. You Aren’t Getting a Holistic View of Your Funds
Whenever you replace your accounting system, be sure to search for one that may handle your income and bills throughout any attribute, like grant, mission, program, or division, whereas not requiring them to be created as segments in your nonprofit’s chart of accounts. The reason being easy. If you happen to want up-to-the-minute balances to your group’s initiatives, each time you add one, you’ll add important quantity to the chart of accounts. When you have 20 initiatives, you will have not less than 20 expense accounts—and certain extra—to trace the steadiness of these initiatives.
Consider monitoring income like baking pizzas. If the system permits for segmented account monitoring, you then’re merely baking one income pizza and slicing it into every of the 20 totally different initiatives. That’s all the time going to be sooner and simpler than baking 20 pizzas.
With a segmented chart of accounts, you possibly can drill deeper into your income sources and higher perceive what’s working. You may make grant-specific or program-specific reviews obtainable as view-only so different areas of your group have entry to that necessary info. And this information rolls up into your organizational funds to offer you a holistic view of your funds.
3. You Want Higher Inner Controls
Your group is constructed on belief. Your funders belief you to spend their presents the way in which you mentioned you’d. When you’ve one or two folks managing the accounting features, the audit path is straightforward. However as your group grows, you want safety and redundancy constructed into your system.
Having inside controls inherent in your fund accounting software program may prevent cash. You don’t have to make use of a fund accounting system to satisfy IRS necessities, however somebody should calculate the right fund balances and make the handbook journal entries. And that somebody is normally the auditor or your CPA, and due to this fact it normally prices you more cash to do it. As soon as you progress previous needing to trace solely the ASU 2016-14 internet asset courses, then a real fund accounting system is nearly a necessity.
When You Know You’re Able to Change
Free and low-cost choices helped you get began. They usually seemingly served you properly as you launched your first packages, secured your first donors, and gained your first grant alternative. In case you are beginning to really feel the pinch of too-small accounting software program, right here are some things to remember as you search for your subsequent answer:
- Compliance with trade accounting and reporting requirements
- Skill to handle a number of budgets, together with a normal funds and budgets for particular packages and restricted funds
- Well timed, correct reporting throughout the system
- Correct reporting of encumbered funds and buy order performance
- Versatile chart of accounts
- Efficient administration of all grants and contracts
- Elevated accountability with inside controls
- Native expense administration and AP automation
- Integrations with different nonprofit administration options
- Safe entry to mission-critical information anytime, wherever
- Designed for nonprofits
Study extra about some great benefits of a fund accounting system purpose-built to your monitoring and segmenting wants with our whitepaper, Why Nonprofits Want Fund Accounting Software program.