As organizations get bigger, off-the-shelf won't do. When the size of the budget is small, not-for-profit organizations can use just about any brand of accounting software that is available. Typically the off-the-shelf offerings, such as Intuit's QuickBooks or Sage Software's Peachtree, fill the bill just nicely. As the organization grows in size, funding sources suddenly start to require detailed financial reports. That's the time that not-for-profit accounting software really becomes important.
Like what you see? Click here to sign up for Accounting Today's daily newsletter to get the latest news and behind the scenes commentary you won't find anywhere else.
In many instances it makes more sense to start off on the right foot and have the not-for-profit purchase industry-specific software from the start. This greatly reduces the possibility that the not-for-profit has to re-learn a new accounting system within the first few years of starting on their old system.
CPAs and CPA firms are becoming comfortable with the idea that a one-size-fits-all policy on accounting software may not works as well for not-for-profits. While the focus for a typical for-profit company is on revenues and profits, not-for-profits will focus more often on tracking the budget versus actual amounts that have been allotted via a grant.
So once you've outgrown the QuickBooks or Peachtree starter accounting system, where do you go from there? Is it time to move upward to a more full-featured, for-profit accounting package, or should you look for an accounting system that is written specifically for not-for-profit organizations? The answer to that question depends on the needs of your not-for-profit.
If you can answer "Yes" to one or more of the following, you're an excellent candidate for not-for-profit accounting software:
Step right up to "Fund Accounting." Your funding source is requiring true fund accounting. This means you need to maintain a self-balancing set of accounting records (often called funds). Any entries between funds are balanced by a due-to/due-from entry reflecting monies that are owed. It's almost always preferable that your accounting software makes this entry for you. Be sure to check this feature because there are still a few that require that you take an extra step to generate that due-to/due-from entry between the different funds.
Interface with donation tracking. If your revenue source shifts so that a larger part of your funding comes from donations, you may find it easier to adopt an all-in-one accounting system with links to donor management. These software packages can track the giving history of your funding sources and make all needed accounting entries to reflect their most current gifts. Ask about the ability to integrate the software to the Web. Online giving is becoming more important to most not-for-profit organizations.
Multiple fiscal years. Different funding sources can all require that you report your revenues and expenses on a calendar that is convenient to them. Virtually none of the standard accounting packages supports the concept of multiple year-ends. That's one of the major benefits that not-for-profit accounting software brings to the table.
Custom financial reporting. Growing organizations are often called upon to prepare their financial statements in a manner that the funding source dictates. For this reason, the so-called "canned" financials are almost always inadequate. Instead you'll need to use a financial report writer so you can tailor any required reports to the requirements of the board. Often the different not-for-profit accounting software packages have created their own financial report writers. When these are not available, you should inquire about the existence of a link to any popular third-party reporting tools such as FRx or F9. Generally, Crystal Report Writer makes a rather inflexible (difficult to lay out) financial report writer, so stick to those report writers specifically offered for financial statement preparation.
Flexible cash or accrual reporting. Reporting on a cash basis is often requested by grantors. Since money is given with the expectation that it will be expended for the requested purpose, many sources of such funds expect to see the cash outflows in the month spent. For this reason, many not-for-profits report their revenues and expenditures on the cash basis. Reporting for these types of funds is much easier when the reporting basis may be easily switched.
Industry leaders. Focus your search on the leading brands of accounting software. Strive for a system that has a network of authorized consultants who are available for on-site assistance when required. If you have your own consultants on staff to help with such projects, research the availability of training classes as well as tools such as technical knowledge bases and local user groups.
Flexible account structure. The combination of a large account number capacity (figure on 12 characters and three segments as a minimum) is a must. Since you never know when you might have to expand your account structure, ask whether it's difficult (or even possible) to expand your account size. The most important part of an account number structure is to make certain that you know exactly how you want reporting to flow. A little thought prior to creating the codes can prevent you from having to go in and massively restructure the accounts as your organization grows.
Project and grant tracking. You will not want to add a set of general ledger account numbers for every project and type of revenue that you track. Instead, find an accounting system that allows you to create an additional field for tracking project and/or grant information. As you enter in accounting data, you'll also attribute each entry to a specific project/grant for which you are tracking related income and expenditures. Resist the urge to create a new set of accounts every time you add a project or grant. That practice works in the short term, but very quickly grows out of control, and within a few years you're suddenly looking at 50-plus page listings of your account numbers.
The general ledger forms the central collection point for every transaction occurring within AccuFund. This module is rather robust, with an ample 255 character maximum for your account codes. These accounts may further be segmented up to 99 different ways, which should prove more than ample for all but the largest and most sophisticated not-for-profits.
There is a lot of value included with the core system, which includes the following modules and functionality: general ledger, financial reporting, accounts payable, cash receipts, encumbrance accounting, data import and export, EFT payments, bank reconciliation, document imaging and user security.
Posting for AccuFund is in real time. There is no posting register to run and update. As you enter in your transactions, they are always updated immediately. The benefit to this is you never need to wonder if unposted transactions might be lurking somewhere in the system making your financial records incomplete.
Custom general ledger financial reports are created in the included Financial Report Writer. This allows for creating reports tailored to your organization's needs. There are 16 separate financial reports which you can use as the basis for further report creation. In many instances, using the included reports to study how they have been designed serves as a good learning tool for building more.
System-level security allows you to restrict individual users to certain areas of the program. There is no ability to restrict access by groups, so as you add or remove employees from the system, you will likely have to create the system access anew for each additional user you enter into security. Adding users to groups is a more standard way of establishing security, which would make security maintenance easier in this system.
The accounts receivable module available with AccuFund offers billing for four types of transactions. You may invoice for inventory, services, third-party billing (where a different party takes care of payment) and miscellaneous item billing for sundry income. Each invoice can be customized within the software. Additionally, the accounts receivable has some ability to interface with Kintera FundWare and Sage MIP NonProfit.
COUGAR MOUNTAIN SOFTWARE
Not-for-profit organizations that are small to medium sized with both traditional and nontraditional processing requirements will find Cougar Mountain Software adaptable to the way their organizations' functions.
Available in three basic flavors, CMS Fund Accounting includes general ledger and bank reconciliation. The CMS Fund Suite adds in accounts payable, purchase order and payroll, while the CMS Revenue Center is a bundle of modules to be used by not-for-profits that need to collect and track more detailed revenue information through the use of inventory, order entry and accounts receivable.
The general ledger supports a 45-character account structure with up to six segments (departments). All inter-fund transfers will automatically have the due-to and due-from entries created to ensure proper fund balances. Basic standard financial reports are included with the GL. Creating more customized reports requires a separate financial report writer.