Follow the Money With Cloud-Based Fund Accounting

Many nonprofits use small business accounting tools to manage their books, often on desktop software or underwhelming online tools. Our message to you today is simple: Stop, and start using nonprofit fun accounting tools.

Your general ledger software is meant to support all the financial operations of an organization, which is a very important task. Yet, for so many nonprofits, it’s just something the bookkeeper uses, and the insights it should offer about how money is being spent and raised are unmonitored and ignored.

Why Does This Happen?

Here are just a few of the reasons that small business accounting tools can’t satisfy the needs that most nonprofits have:

  • No fund accounting (more on this later)
  • Remote access and multi-user access doesn’t work well
  • Reporting and queries are not user-friendly or intuitive

Fund Accounting

Fund accounting ties every transaction that an organization performs to a specific program or organizational goal. Transactions can be posted to a fund—like a specific grant, branch office, or organizational goal—as well as to your general ledger accounts. This helps you answer the question of why you spent money, not just what you spent it on. True fund accounting makes reporting much easier to generate, and much more meaningful to study. Without fund accounting, and we often see nonprofits make do with tags or classification features, the long-term results are never good.

Without true fund accounting, you won’t be able to report on the fiscal health of each program or branch separately from inside your accounting system. And if your accounting system can’t give you profit-and-loss statements for your programs, you’re probably tracking that information in Excel, or not at all! Nonprofits, even small ones, should adopt a cloud-based, fund accounting system designed to meet nonprofit needs.

Done right, fund accounting makes creating useful reports simpler and quicker. Stop blocking out three weeks to prepare board books. True fund accounting offers an unparalleled level of insight and understanding that no manager, executive, or board member should be without—in a fraction of the time.

Remote and Multi-user Access

Many accounting packages in use at nonprofits are desktop applications. In order to use the software, you must be at the computer running it. To overcome this inconvenience, some organizations set up VPNs and remote access, or run the software from an Internet server. These solutions are all somewhat balky and slow, and require maintenance of a network infrastructure simply to enable access to the books. Having multiple people access the software at the same time presents further complications and compromises.

Online services try to solve this problem by offering accounting software as a web application. Unfortunately, desktop users often don’t recognize the web-based interface, and users regularly pan the usability, inexplicable errors, and slow speeds they experience. What a high price to pay for remote and multi-user access!

Fund accounting tools deployed in the cloud are built to a different specification. You’ll find all the power and speed you’re looking for, as well as a rich set of tools around security, user permissions, and data backup.

Reporting

The point of financial software is to keep track of the money, and help decision-makers get relevant information and insights about the organization’s finances. Yet, at many organizations, financial reporting generated from the accounting software just isn’t looked at very often. Senior managers may not even have access to the program. They certainly don’t have clear dashboards, visual reports, or a focus on key performance indicators that turn numbers into insights. A system is really only as good as the reporting it generates. Most small business accounting tools simply aren’t up to par, especially when dealing with nonprofit issues, like grant accounting, pledge management, and the like. Does your accounting software still call donors customers? No wonder you don’t get along that well—you’re not even speaking the same language!

While small business accounting tools are often the first thing nonprofits turn to when managing their finances, that doesn’t mean it’s the right tool for the job. It’s important that your organization finds a system that can fit your needs as a nonprofit. At Sage70, we recommend alternatives, depending on an organization’s size, needs, and budget.

Explore all these considerations when finding the perfect accounting software for your organization. You will thank yourself later!

Isaac Shalev
Isaac combines technical, product and digital marketing knowledge with a keen sense of how people and organizations relate to technology and change. As president of Sage70, Isaac helps nonprofit organizations envision change, plan strategy, and put technology to work.