Why commercial accounting software causes headaches for nonprofits

September 15, 2021 Eve Heidemann
There’s no question that keeping an organisation’s accounts in order is an enormous responsibility, and even more so in the modern age.
The public scrutiny that’s come with digital communications, social media, and the 24-hour news cycle has meant there’s little mercy for perceived violations of public trust when it comes to financial mistakes – no matter how honest they may be.
Your organisation depends on you to balance complex business decisions, manage financial compliance, and demonstrate accountability: all with a “need this done now” attitude. 
That’s why it’s so crucial that your accounting software is suited to the specific needs of your organisation: it can be the difference between a cause for headaches or the pressure-relieving tool that seamlessly delivers smooth financial operations.
So how do you know which accounting solution is right for your organisation?

Not all accounting solutions are suitable for nonprofits

While most for-profit enterprises just need to track income and expenses, those familiar with the terms ‘restricted’ and ‘unrestricted’ funds on financial statements will know that for most nonprofits, accounting is just not that simple.
Managing unique revenue streams such as donations, membership dues, program revenues, grants, and investment income requires software tailored to these diverse income sources – and the specific requirements that come with each.
If you have revenue streams with restrictions on what that income can and can’t be used for (think grants or donations for specific projects), you’ll need to track the income and expenses for these separately to ensure you’re using those funds in the way your organisation has pledged to.
The problem is, most for-profit accounting software just isn’t set up to operate like this – so it’s no wonder that trying to do so on a platform not built for it is causing unnecessary headaches and stress!
Thankfully, there’s another approach.

Fund accounting: software designed for the specific reporting needs of nonprofits

Fund accounting software is purpose-built to track restricted and unrestricted funds’ income and expense streams separately. 
Accounting solutions tailored to nonprofits allow you to seamlessly generate reports on where specific revenue streams are being spent – to ensure your organisation is meeting the requirements stipulated for that income. 
Accounting by fund is a crucial way to maintain financial integrity as a nonprofit. But more than that, it can also provide you with valuable insights to inform your organisation’s strategy and forward planning.
These powerful analytics aren’t just data for the sake of benefactors: they can help your organisation fulfil its mission by providing feedback on areas where funding is needed, superfluous, or as required for individual projects.
This can inform leadership decisions with regards to future growth and investment in your organisation’s projects and strategy. 

You’re on a mission. Don’t let your accounting solution hold you back. 

Your organisation exists to do good in the world – so it’s worth ensuring your software is a tool that helps, rather than hinders your mission.
By switching to an accounting solution that’s tailored to the specific needs of a nonprofit, your organisation could reap a host of benefits, including:
  • Cost savings in time, energy, effort, and stress
  • Streamlined processes
  • Increased efficiencies
  • Clear, easy-to-understand reporting
  • Ability to track program success, support fundraising efforts, and ensure overall integrity for your organisation
  • Integration of critical nonprofit applications like CRM, fundraising, accounts payable automation, and more
  • Clarity in providing the highest levels of transparency and accountability to be able to make solid, strategic decisions and avoid violating the public’s trust.
What’s more is that many solutions are cloud-based, meaning you can access your organisation’s real-time financial data anywhere, anytime, and from any device ¬ because your organisation’s mission doesn’t just happen in an office.

Access more information today on how a nonprofit-specific accounting solution can help your organisation achieve its mission – download Blackbaud Pacific’s whitepaper here: Why Nonprofits Need Nonprofit Accounting Software.

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Blackbaud Buyer’s Guide to Fund Accounting Software
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