Nonprofit accounting software is a specialized version of accounting software that’s tailored to your unique business needs. Nonprofit organizations, churches, and charities use a special type of fund accounting software.
Due to the nature of their work and the people they serve, nonprofits often have more complex financial needs. While most for-profit businesses can use general accounting software, a nonprofit organization needs something more specific to meet its unique needs.
There are several software packages designed specifically for nonprofits that make it easier to manage day-to-day operations and meet annual compliance standards. These accounting software programs are designed to streamline your nonprofit’s bookkeeping and financial reporting processes while keeping you compliant with IRS standards.
While there isn’t one specific best accounting software for nonprofits out there, we can certainly help you find the top software. Within it, you should be able to tailor accounting features and accounting processes to fit your nonprofit organization.
Dedicated Nonprofit Accounting Software
Many nonprofit organizations use dedicated fund accounting software to manage the cash flow in their books. This type of software is designed especially for nonprofits, having features that conventional accounting systems are lacking.
For example, the right nonprofit accounting software could have special sections for tracking donations and other financial data. It could generate accounting reports for bank accounts with multiple currencies. It could do administrative tasks such as tracking financial information on recurring donations or recurring transactions.
Dedicated nonprofit accounting software often uses terminology that is more relevant to nonprofits, such as “grants” instead of “revenue.” There are also dedicated nonprofit accounting software programs designed for nonprofits that have specific needs, like serving specific populations or working with certain types of data.
Having dedicated nonprofit accounting software such as Capital Business Solutions allows you to tailor the program to your organization. Additionally, it allows you to turn mundane accounting tasks such as online payments, inventory management, and donation management into a nonprofit accounting system 100% tailored to your needs.
Cloud-Based Nonprofit Accounting Software
Cloud-based software is a popular choice because it offers many of the same features as dedicated nonprofit accounting software. Cloud-based nonprofit accounting programs also allow you to tailor the software to your specific needs.
Because it is hosted in a central location, you can access your general ledger from any computer with internet access.
You may also have the option to use the software “as a service” (cloud software) or to download the software for use on your own computer. Many cloud-based nonprofits also have an on-site option for organizations that want to host the software themselves.
Excel-Based Nonprofit Accounting Software
Excel-based nonprofit accounting software is a flexible but less customized option. It may not be the best accounting solution, but it beats manual data entry when you are working with restricted funds.
Excel-based accounting software offers only basic accounting features. It makes managing funds and accounting records without an accounting team easy, but it may lack features that are critical to nonprofit organizations.
For example, very basic excel-based accounting software may not have a way to track donations or volunteers within your nonprofit organization. You should also be careful that you do not add too many formulas or macros to an excel spreadsheet, as your computer may not be able to handle the amount of data.
Excel-based accounting software for nonprofits is a good choice for small organizations or for those who have highly specific needs with their software. Excel-based accounting software allows you to do payment processing and inventory tracking, as well as expense tracking in any way that you want.
Organizational Behavior and Culture Change Software
While most people think of nonprofit accounting software as financial management software, there are other types of accounting software for nonprofits.
Organizational behavior and culture change software can help you understand your employees’ and volunteers’ motivations and behavior. This can allow you to better select and place employees, and to communicate with your team more effectively.
Organizational behavior software can also help you conduct more effective training and manage your onboarding process.
This can be an important tool in a nonprofit organization that has a lot of volunteers, such as those that provide disaster relief.
Financial Management Software
Financial management software is often included in any nonprofit accounting software. However, it’s important to remember that this type of software goes beyond the financial position of the business.
Financial management software allows you easy cash management with your organization’s cash flow and budget.
This type of software is often a valuable financial management solution for nonprofits, which may have complex financial needs.
For example, many nonprofits receive government grants or other funds that must be spent in a certain way. Financial management software allows you to make financial statements to track and document these obligations, as well as your other financial obligations and assets. This can help you avoid financial penalties, as well as increase your organization’s overall financial health.
Best Features You Need to Look For in Non-Profit Accounting
Accounting software that uses a Double-entry accounting system is best for non-profit organizations because it produces a complete set of financial reports.
Double-entry accounting makes sure that every entry in an organization’s financial records is balanced. This means that every credit (income) has a corresponding debit (expense) that adds up to zero.
Double-entry accounting gives you a complete picture of your business’s financial activity. This includes revenue and cash flow, as well as profit and loss. It is essential for auditing and compliance purposes.
Your nonprofit accounting software should be able to produce financial reports that meet the reporting requirements set by the IRS. Specifically, your nonprofit accounting software should be able to produce a Profit and Loss report, Balance Sheet, and Schedule C report.
In addition to meeting IRS requirements, a good financial management system also lets you customize your reports to meet your particular needs. You should look for nonprofit accounting software that has a robust reporting feature.
Some software offers basic reporting functionality, while others provide extensive reporting capability. Both types of software are adequate for most organizations. The key is to find a system that meets your reporting needs while also providing the level of functionality you need.
Customers who donate online expect a smooth donation process. You want to be able to track donations and be confident that the information you report on your taxes is accurate.
Nonprofit accounting software can ease donor management by tracking electronic donations and even processing payment gateways for donations. Some donor management tools even allow you to create donation pages and accept online payments.
The best nonprofit accounting software has built-in features that let you track and record e-donations.
If you host events or fundraisers, your nonprofit accounting software should let you track and manage these activities. Special event accounting software has features designed to help you manage event finances.
You can use event accounting software for expense management and track and generate reports. Some systems even let you export or download data, which is helpful if you have a third-party accountant.
If your organization has tax-exempt status, you need to track all donations and expenses that are tax-exempt. You also need to track all the paperwork you file and submit related to your non-profit status.
The tax-exempt tracking feature allows you to keep track of the documents you generate. Most systems let you create custom fields that meet the needs of your organization. This feature also allows you to store documents electronically. You can access them at any time, which makes it easier to prepare year-end reports and stay compliant with regulatory agencies.
Tender and grant tracking
If your organization applies for government grants and other types of tenders, your accounting software should have a field for tracking them. Some systems let you create custom fields for activities related to tenders and grants.
You can also use the data fields for tracking expenses and revenue. This feature is helpful if you are applying for and managing multiple grants.
You may also want to consider using software designed specifically for grant management. Grant management software has features designed specifically for grant tracking.
Some software also lets you create a tender tracking list. A tender tracking list is a grid that lets you keep track of all tenders you are bidding on. This feature is helpful if you are bidding on multiple projects. It allows you to track and organize information related to each tender. You can use it to track due dates, contact information, and other details.
You may have employees who are paid a regular salary or have other types of compensation that must be reported on a W-2 form. The best nonprofit accounting software for payroll includes a robust Human Resources (HR) feature.
This makes the accounting process easy as it lets you track employee information and manage employee payroll. Some systems let you create custom fields for tracking employee data. This feature is helpful if you have employees who are paid in different ways.
Other systems provide you with the ability to create tax-related forms. This includes W-2 and 1099 forms. Some systems even let you e-file these forms with the IRS.
Auditing and compliance features
If your organization is audited, you want to make sure you can quickly produce the correct financial data.
Using software with auditing features can help you meet the regulatory requirements related to keeping accurate financial records.
Some software allows you to create custom fields for specific activities or items. This feature is helpful if you have certain items that need to be tracked in a different way.
Using a general accounting software program that does not have specific features for non-profit organizations can be cumbersome. These types of programs are made for for-profit accounting and have many features that are not necessary for non-profit organizations.
4 of the Best Accounting Software for Nonprofits
You can’t go wrong with any of these, but here is a list of the most popular ones.
QuickBooks (And Quickbooks Enterprise Nonprofit)
The most popular fund accounting program for nonprofits is QuickBooks. It can simplify and manage your fund bookkeeping. Nonprofits can purchase their goods at a reduced cost.
This program can be used by businesses for all of their financial processes, including billing, bookkeeping, donation tracking, and more.
Accounting software for nonprofits called Sage Intacct is fully cloud-based. Thus, organizations have global access to their financial data. Sage Intacct delivers an automated fund, grant, revenue, and billing procedure in addition to standard accounting functions like a general ledger and cash management.
Another cloud-based nonprofit accounting solution with third-party integration features is Accufund. Nonprofits can access their top-notch accounting, human resources, and fundraising services for excellent prices and from anywhere.
If you’re looking for a MIP fund accounting and accounting software designed exclusively for charities, go with Nonprofit+! This one aids in managing grants, donors, restricted funds, and fund accounting. Additionally, they offer features like reporting and cash management.
Accounting software that is designed for nonprofit organizations has many features that make it easy to use. Your accounting software should be easy to navigate, have a well-designed user interface, and include helpful tutorials.
You should carefully consider which features are most important to you when selecting nonprofit accounting software. Make sure to read reviews and compare different products. Take the time to find the perfect solution for your organization.