by Wayne Schulz, CPA
When nonprofit organizations research accounting software, they often ask why they need a fund accounting system when some lower-priced, general use accounting software products are available.
Here are the top reasons that you will often want to pass over the low-priced general use systems in favor of nonprofit-specific accounting software.
Limitations of low-end products
Transaction Speed: Low-end, general use accounting software products tend to slow down when their transaction volume exceeds the 300 to 500 transaction-per-month level. The software is slick, easy to use and end-users love it. Then what’s the problem? After a year of heavy usage, many times there is simply too much data within the program and the reporting and data entry slows to a snails pace.
Multi-user limits: Low-end, general use accounting software products are gradually being improved to handle more transactions - but they haven’t been thoroughly redesigned to handle the stresses that a growing organization can place on the software. One good example is that both packages work best with under five simultaneous users.
Reporting limits: Reporting with the low-end products is canned. Yes, with both products you can have some ability to customize the reports - but there is not an easy way to use popular third-party tools, such as FRx Financial Report Writer, F9 Spreadsheet Links or Crystal Report Writer. On the general-use, low end, QuickBooks and Peachtree reports always look like, well, QuickBooks or Peachtree reports. There is not much customization that you can provide, which is critical when an organization is growing and needs more in-depth reporting for funding sources.
Fund accounting limitation: Frequently nonprofits must adhere to fund accounting rules, which require a self-balancing chart of accounts for each fund, such as restricted, or unrestricted funds, property and endowments.
Small organizations can use any number of manual workarounds to make QuickBooks or Peachtree do what they need. But, as the organization grows, you’ll discover that those workarounds become more cumbersome.
Lack of consultants: The low cost systems often are "do-it-yourself" projects. Highly trained consultants usually are not available to provide ongoing training and support.
No ability to customize: Should the need for simple customization become apparent, the low-end systems simply don’t offer that option.
Organizations who should consider the low end
Before selecting a low-end system, be sure to talk with your accountant. Your CPA knows your reporting requirements and may also be highly familiar with the different accounting systems that are available.
- Any not-for-profit that is small (in transaction volume and complexity) and plans to be that way for five or more years.
- Not-for-profits with no need for fund accounting.
- Organizations with limited funds.
- Not-for-profits with CPA firms that have the specialized skills to assess their needs and make a recommendation to pursue low-end software.
In the low end, QuickBooks and Peachtree are great products and fit the needs of many nonprofits. If your transaction volume is low, budget is small, requirements are minimal - think about using one of the low-cost systems. However, with the low-end products, nonprofits do not get any fund accounting or growth capacity.Organizations that should avoid low-end systems
- Anyone with complex reporting - this includes any need to generate reports that cross fiscal years, includes large numbers of project or grant tracking or requires extensive history to be retained. (The low-end systems may claim to retain large volumes of history but when speed suffers, most organizations begin to purge data in an effort to regain some performance).
- Not-for-profits who anticipate growing rapidly.
- Not-for-profits who need true fund accounting (self-balancing charts of accounts).
How about a general market midrange system? The biggest competitors that non-profit accounting packages have are the midrange systems, such as Great Plains, MAS90 or a Navision product - all of which have the speed, flexibility and power that most organizations ever need. These midrange systems are sold in modules and many times can be manipulated quite easily to fashion virtually any report that would be desired. They have add-on modules, such as Crystal Report Writer and FRx that read the financial or company data files and create ultra-customized reports.
The limitations of midrange systems
Fund accounting: Most midrange systems have the same flaw as the low-end systems - they don’t allow for maintaining self balancing charts of accounts as required by the rules of fund accounting. Some midrange solutions offer the option of add-ons that modify the software to make it perform the fund accounting function.
If fund accounting is the only reason for researching nonprofit software, these enhancements could make a midrange system work nicely. But, don’t underestimate the difficulty of keeping funds in balance. Nonprofit software automatically creates inter-fund entries every time you book an entry that crosses different funds. This keeps funds in balance - a task that is difficult to manually do with the midrange systems.
Project and grant tracking: Funding sources often require nonprofit entities to report on many different types of projects or grants. These almost always cross fiscal years and have other types of reporting that may be tricky for the midrange systems to easily duplicate. There are enhancements, such as F9, that are available to duplicate this functionality.
Links to fundraising: Larger nonprofits may want to link their accounting system to a fundraising program. Midrange systems almost always lack such a native ability.
Not-for-profit specific reporting: Reporting that conforms to GAAP and FASB and is specific to nonprofits is all automatically built into the nonprofit-industry - specific accounting systems. The midrange systems require you to develop a workaround.
Encumbrances: Traditional midrange systems offer the ability to create purchase orders. The not-for-profit software often goes many steps further and generates detailed encumbrance reports whose responsibility can be assigned to specific departments within the organization.
Now that we have established that nonprofit industry applications better meet the requirements of most users, below is a review of some the sector’s leading products.
The Financial Edge
Blackbaud
Blackbaud has just released the latest upgrade to its popular Accounting for Nonprofits software. Renamed and re-designed, Financial Edge has a more polished Web-browser-like interface than its predecessor - version 6.4 of Accounting for Nonprofits.
Financial Edge users typically rely on consultants to assist them with system installation, configuration and training. While the actual use of the software isn’t any more or less complex than similar packages - the steps required to make sure that the software is properly configured are more detailed. You will definitely feel more comfortable having your IT manager work with a trained Blackbaud consultant to ensure that everything goes smoothly with upgrades.
The selling points for Blackbaud were initially that it linked to Blackbaud’s popular Raiser’s Edge Fundraising system. Over time, the accounting system has grown to be a full-featured and worthy competitor to any of the systems that are available. The documentation is extremely thorough and well-organized. Training and annual conferences are available to all users of the software.
The initial upgrade release of Financial Edge includes the general ledger and accounts payable. Because the software was re-written, additional modules will be released over time until all of the previously available software has been upgraded.
Blackbaud is a system that growing nonprofits will find practically impossible to outgrow. The database is smartly designed to take advantage of the latest technologies and provide the best performance given the anticipated high volume of most users. Nonprofits that need power, performance and expandability need Blackbaud.
MIP NonProfit Series Pro
MIP-Best Nonprofit and Government Division
Last September, Micro Information Products, also called MIP, became a subsidiary of Best Software, the company formerly known as Sage, which also markets Peachtree, MAS90, FAS and Best Enterprise accounting solutions.
The marriage introduced MIP’s products to a large group of authorized consultants who already handle those other products.
MIP has an admirable policy that offers a 90-day unconditional money-back guarantee on the purchase of their software. If, for any reason, you find that the software doesn’t perform to your expectations, it can be returned for a refund.
Organizations with large chart of account structures will thrive within the power and flexibility that MIP allows. The chart of accounts is governed by what MIP calls a table-driven architecture. This means that you define the set up and validation for your accounts and can use virtually any length as your maximum account size. As accounts grow, they can be automatically validated against rules that you create within the software.
Tracking projects or grants is accomplished via the chart of accounts. The flexibility in the reporting is virtually unlimited as you create your own reports with MIP’s included custom report writer. FASB 117 reporting is easy, as is most other custom reporting.
Large organizations with heavy data entry will benefit from the Night Shift Scheduler. This module lets users queue tasks for running during off-peak hours. Single or multiple tasks can be lined up for running during the off-peak overnight hours.
MIP offers the full complement of modules that growing nonprofits need, except for fundraising. Its allocation module handles multiple sequential allocations where you may specify the order in which an allocation schedule should be run.
If you’re looking for a flexible and easy-to-use nonprofit accounting system - MIP is one that should be on your short list for serious evaluation.
Not included in this review is MIP’s Intro - a fund accounting solution that has the industry-specific features that nonprofits require, but is priced to compete for the organizations using the low-priced QuickBooks and Peachtree general use accounting products.
Fund Accounting
For Navision
Serenic Software
This fund accounting program is designed to work with accounting software by Navision. Its ideal users would be nonprofits with experience using Navision or anyone whose workflow and procedures may require some customizations to the core accounting software.
Serenic builds on the strong foundation laid by the core Navision accounting system. All funds are self-balancing and Due To and Due From entries can be created automatically by the software. The software offers plenty of room in the general ledger - with up to 110 characters and 10 segments in their chart of accounts - it is difficult to imagine that any not-for-profit could exceed its capabilities.
All reports can be generated to a file or to an html reporting format for easy distribution. If you have a large number of off-site workers you’ll be delighted to know that there is both a Web-based time entry module, as well as a requisition entry. Either of these modules greatly expands the flexibility of the system.
Large, not-for-profit organizations make an even more ideal fit for Fund Accounting For Navision. The Navision software can be customized by an experienced consultant to fit your specific needs. In addition advanced features like foreign currency, budget alerts via e-mail and availability of SQL databases are sure to appeal to those organizations that anticipate rapid growth.
Although Serenic’s Fund Accounting For Navision is a relative newcomer to the nonprofit scene, its management has a significant history with the marketplace and the foundation of the system. And, Navision is an increasingly popular system that is often chosen by organizations who find that they cannot fit into any of the canned programs.
When standard accounting software won’t fit the bill - you’ll find Serenic’s Fund Accounting For Navision provides just the right mixture of features and customizability to design your perfect solution.
Executive Data Systems
Medium-sized nonprofits on a budget should look at what Executive Data Systems has to offer. Their affordable software is available risk-free via their 30-day free trial. In addition to the core accounting modules, Executive Data Systems offers its own fund-raising software.
Navigating the EDS screens is a snap. Menu choices are all logically arranged and intuitive. The system is well documented and has been available since the early 1980s - making it one of the longest available packages servicing the not-for-profit marketplace.
For those organizations on a smaller budget, there is an entry-level starter kit available, which is feature-reduced and about half the cost of the regular Executive Data Systems software package.
Security-conscious companies will be happy to see that not only does every user get their own log in and password, but a log file shows who went into each module and when. This is definitely a help for those larger organizations where many people are in and out of the system during the day.
A General Ledger Import module is available and would allow you to interface your software to any other system you might use that is generating data that you would like to import to Executive Data Systems. As long as you create the data in a common format, the system can read the information and save the time that is otherwise required to manually keypunch the data.
Executive Data Systems is a long-time player in the nonprofit market. Its accounting software has evolved into a well-designed package that can fit the needs of almost any nonprofit.
Fundware
American Fundware
With its latest release, Fundware continues to improve. General ledger budgeting has been beefed up so that users can be locked out of allocating against specific accounts whose spending limits have already been reached. Instead of prohibiting the use of the account you can choose to display a warning message only.
Entries into the general ledger may be retained for an unlimited period of time. The full complement of FASB reporting is available, as is the automatic creation of inter-fund balancing entries. Where simple journal entries aren’t enough to create monthly allocations, there is an exceptionally versatile Allocation Management module that allows for allocations based on indirect costs to be based on the specifications of your program or grant funding sources.
Fundware Enterprise is the solution that is offered for larger organizations. Based on Microsoft SQL, Fundware Enterprise has been created with performance in mind. By using the SQL database structure, you gain an accounting system that can handle the processing needs of all but the largest companies.
The payroll module helps to automatically allocate employee wages across multiple grants or funding sources. The allocations can be created with user-defined distribution tables that result in a customized timesheet system. A mini human resources system could be created by using the unlimited user-defined fields allowed within the system.
Perhaps the most unique component of the Fundware suite is its ability to use the Synex Software F9 add-on to create links to Microsoft or Lotus spreadsheets. These links are in real time and allow the users to create their own custom spreadsheets that feed upon accounting data, which is stored in the general ledger. The real beauty of F9 is that it is a product that builds upon spreadsheet software that most staff are familiar with. Within 15 minutes of studying a few examples, users can be creating their own reports that they format and manipulate using spreadsheet knowledge that they already possess.
With a long history of satisfying nonprofit clients, Fundware has a lot to offer. Spreadsheet wizards should make sure to review the F9 link .
Fund Accounting For Windows
Cougar Mountain
Cougar Mountain offers a solution that nonprofits on particularly tight budgets will love. Their two-user Fund Accounting For Windows is about half the cost of the competitors. But, while the price is small, the features are not. Account size is ample at 45 characters and up to six segments.
Projects and grants can each be tracked on different years. The budget feature allows for up to three years of history - the current year and up to two years of forecasting. Whenever you create a transaction entry - whether it’s a journal entry or a transaction from a subsidiary module - there is an automatic inter-fund entry created at the same time (when required).
The general ledger that supports allocation entries can be distributed by percent or dollar values across different accounts, funds or departments - all within the periods of your choosing.
Screens within the system are well laid out and lend themselves to easy transaction entry. For ease-of-setup, there are sample charts of accounts included, which can greatly speed the initial setup for smaller nonprofits. Creating custom reports is accomplished via the Cougar Mountain Report Writer and not a third-party reporting tool.
During the set up of the software you may wish to make use of the Data Exchange module. This program will read data from any of several different file formats and import it directly into Cougar Mountain. This can save hours of manual keypunching during the sometimes frustrating set up stages. Once the software is up and running, Data Exchange can be used to extract data from your system.
Value conscious not-for-profits that aren’t looking to spend a ton of money on consultants, configuration and set up should review Cougar Mountain closely. Their all-inclusive software is well documented and designed for easy learning by most not-for-profits.
When selecting not-for-profit software, keep these ideas in mind:
- What happens if your organization grows? Several of the software reviewed packages offer an upgrade path. If you suspect that your transaction processing may grow quickly, verify that there is an upgrade path to convert your accounting data to a larger system.
- What is the true cost of the system? Powerful and flexible accounting packages often must be implemented by costly consultants. When researching the different systems that are available, make sure that you factor in the cost of the labor to have your staff trained along with the ongoing support and maintenance that is required.
- Is there a local source of support? Some organizations don’t mind dealing with the home office when they purchase software. Because of the increasing complexity of today’s software, it is almost always a good idea to, at least, consider using a local consultant who is an expert at setting up and configuring the software.
