In a nonprofit organization, a fund has a set of self-balancing accounts that records its assets and cash, including any liabilities it has as well as its balances and payments. Financial accounting software ensures that government and non-profit agencies can build balance sheets for every unit or fund. This permits them to identify expenditures and funding amounts by grant provider and project.
What Is A Fund Accounting Tool?
With stewardship and accountability at the forefront of nonprofits’ priorities, nonprofit accounting tools help track the transactions, expenses, and funds. This contrasts with profit-maximizing motives in other sets of commercial activities.
Fund accounting tools offer self-balancing, self-contained records about individual donations, grants, and projects. A nonprofit can utilize a management suite in conjunction with fund accounting tools like Aplos to track its members’ contributions. This ensures responsible, accountable, and transparent spending.
Several organizations which use nonprofit accounting tools include:
- Healthcare providers
- Faith-based organizations
- State, local, or federal government entities
- Charitable and social service organizations
Essential features to look forward to with your fund accounting tool includes;
While low-priced software can be enticing and may offer cost-efficiency, a good deal, and all may seem well, if it can’t provide the benefits you’re expecting, this tool is best tagged as a useless purchase. Include this factor when checking functionalities that are not beneficial on your end.
- Ongoing Cost and Price
Software solution pricing is vital and won’t be the only expense. This system may require support, conversion, consulting, training, and maintenance, requiring careful consideration before purchasing accounting software for a nonprofit organization.
Several solutions can be deceiving with its low-cost tools that require customization, which can cost you more to maintain and install. Check for a device that offers transparency and how the overall tool will cost you before settling on it.
In software reporting, determine if a multifaceted reporting option will be helpful to you and, if so, identify the level of complexity. Ensure that the reporting options can be utilized on multiple dates and fiscal year options and that the format is compatible with what you are currently using. It is essential to determine whether you can create your customized report using it.
Check the level of complexity and robustness of reporting capabilities on your fund accounting tool, and you’ll know more about your organization’s needs. So, be sure to identify what your organization’s requirements are.
Determine your future needs along with their functionalities. As soon as you have a clear idea of your distinctive needs, you can compare every software feature with your organization’s list of requirements. Also, ensure that every element is outlined with the benefits that will simplify your workloads.
- Audit Trail
In addition, recording all transactions permits easy transparency by allowing auditors to track financial information from the available records to source information, including forms, vouchers, invoices, receipts for core objectivity.
An accountant who analyzes software can tell you if an audit trail capability exists in that software. You may also want to inquire with other nonprofit organizations about auditing processes.
You do not want to invest in accounting software that has limited functionalities and scalability. Look for a solution that has features that align with your organization’s needs and is scalable.
The software must enable you to purchase required modules now and can leverage them going forward while still retaining a flexible price point. These can be achieved with product upgrades and a modular solution.
Interface ease of use is another feature that needs to be considered when searching for a fund accounting solution. It must easily communicate and integrate with various accounting or non-accounting related solutions.
Choosing a high-quality package solution based on your requirements is vital without using one software provider.
What is the Difference Between A Regular Accounting And Fund Accounting
Understanding the key differences of a nonprofit standard over a for-profit accounting tool is essential to ensure its overall efficacy to your requirements. Fund accounting tools focus on the organization’s accountability and transparency rather than its profitability.
A for-profit entity has a primary ledger which comes as a single-self-balancing account. As with nonprofit organizations, the tool typically has several units of funds or general ledgers.
Below are known benefits of using a fund accounting solution:
- It increases organizations accountability
- It keeps track of individual funds separately
- It delivers informative and transparent reports
- It is associated with your relevant projects.
Finding the perfect software solution for your nonprofit accounting fund is complex and requires identifying a compatible tool. However, you are one step closer to managing your accounting and reporting needs with the knowledge of what you need, functionalities, and scalability. This improves time efficiency and helps reduce organization costs.