Fund accounting software is not the same thing as general accounting software, although many nonprofits often confuse the two. “A number of products presented as NFP solutions, are in fact NOT NFP,” warns Randy Johnston, executive vice president of K2 Enterprises, a provider of professional education to accountants. “They can’t do true fund accounting, and don’t have other key capabilities like proper project accounting.”

“However, some NFP accounting needs do not require fund accounting, so general accounting products can solve the business problem,” says Johnston.

There is a consensus among market followers that The Financial Edge from Blackbaud and Sage Software's Sage MIP Fund Accounting lead the pack. In last year’s survey of approximately 2,400 nonprofit users, Campbell Rinker, a market research firm specializing in the nonprofit arena, found the two were tied for the top slot.

However, there was one differentiator:  The Financial Edge rated a little better with organizations that have revenue of less than $5 million annually, while Sage MIP Fund Accounting did better with larger nonprofits. Campbell Rinker will release this year’s report next month. The number of nonprofits surveyed has grown from 2,400 to 3,900. A summary report of results will be made available for free next month.  There is a sign-up page for the report here:  http://www.campbellrinker.com/temp/Report-Sign-Up.html

As further demonstration of how closely Blackbaud and Sage rate, K2 Enterprises’ Randy Johnston says that “Sage MIP is the leading NFP product in the U.S. in the mid-market and below this year.”

If early responses to Campbell Rinker’s September 2009 survey prove prescient of the final report, the two will remain in a close heat. “A majority of nonprofits – about  three in five -- are saying that the next time they evaluate the accounting solution they are currently using, they will probably upgrade their solution rather than switch,” says Justin Cross, director of Syndicated Research at Campbell Rinker.

“About two-thirds of accounting solution users would recommend the solution they currently use to a similar organization,” he adds.

Whatever is causing the brand loyalty among nonprofits, it isn’t lack of experience with other brands. “Approximately one in four accounting solution users have used more than one accounting solution over the past three years,” reports Cross.

“Blackbaud is the most robust and user friendly, in my opinion, although it has limitations such as the lack of a deferred revenue module,” says Rebeka J. Mazzone, CPA, director of the Rhode Island Region for Accounting Management Solutions, an accounting consultancy with a nonprofit subspecialty.

Nonprofits should, however, take a harder look at this year’s lineup of fund accounting solutions to make sure they are not missing out on important enhancements. “Leading NFP products have added portal capabilities over the last few years,” says Johnston.

Despite Blackbaud’s and Sage’s high ratings and the NP loyalties to other brands as well, smaller nonprofits are still left out in the cold. “Many small not-for-profits cannot afford the cost of these types of self balancing fund accounting systems,” says Mazzone, who has served as an auditor for NFP's for seven years and as an interim CFO for many NFP organizations during her current stint at AMS.

“For small organizations, usually below $5 million -- and definitely below $1 million -- a system like Peachtree is an excellent option,” says Mazzone.  “It is very robust and though it does not have the self balancing funds built in, funds can be created with a well thought out chart of accounts.”

NEW (Nonprofit Enterprise at Work) based in Ann Arbor, Michigan manages I.T. for 15 nonprofits, finds that Quickbooks is the tool of choice for small- and medium-sized organizations. “It seems to hit the sweet spot for modest-sized organizations in terms of cost, capability and ease of use,” says Neel Hajra, president and CEO of NEW.

The remaining leading brands in fund accounting solutions include Accufund, Cougar Mountain’s CMS Fund Suite, CYMA Not-for-Profit Edition, Kintera’s FundWare, Open System’s Traverse Not-for-Profit, and Serenic Corp’s Serenic Navigator for Not-for-Profits.

“Whatever system you choose, do not overlook the most important parts: the chart of accounts design, the custom reports, and the needs and costs for ongoing staff training,” advises Mazzone.