Estimated reading time: 3 minutes, 24 seconds

In the early stages of a nonprofit’s growth, accounting systems may not feel like a priority. However, as the organization grows, it can become increasingly complicated and time-consuming to effectively analyze your financial and operating data. Implementing a technologically advanced financial management system can ease this burden considerably by automating and streamlining core accounting, tracking, and reporting functions, making it possible for a non-profit to grow and carry out its core mission.  

That said, not all systems have equal functionality, especially for nonprofits, whose needs are decidedly unique. When evaluating different accounting software solutions, it's critical for nonprofits to keep a few must-have features in mind.

Nonprofit/Fund Accounting
Most nonprofits take in funds from a variety of sources– be they donors, grants, or government funding. Acquiring new funds is always positive; however, nonprofits are subject to a unique set of regulations that mandate high levels of transparency and accountability. Most organizations are happy to comply, but the work that goes into ensuring widespread visibility and accurate tracking can be tedious, and leaves your organization vulnerable to human errors. Nonprofits should seek out systems that have the capacity to streamline these processes and ensure that the organization is held to the highest standard of accountability while also maintaining operational efficiency.

Automated, Flexible Financial Processes
A modern general ledger is more than a standard chart of accounts: it should allow you to manage, analyze, and present your nonprofit’s financial information the way you want, without adding complexity to your chart of accounts or using external reporting tools. The accounting system you use should adapt to your optimal organizational structure and workflows rather than limit your operational flexibility or force you to re-implement software or re-write custom code. Nonprofits in particular don’t have the time to waste on complex systems, so the onus should be on systems need to meet them where they are.

Financial Insight
A capable nonprofit accounting system provides in-depth, real-time insight into the organization, allowing the nonprofit to capitalize on new opportunities or quickly recognize the need for corrective action. Organizations benefit from having a thorough picture of all financial performance, from high-level summaries down to the underlying transactions. To gain greater financial and operational insight, nonprofits should look for systems that provide multiple operating dimensions for all transactions that let you categorize each transaction by donor, program, grant, location, etc. It’s also critical that the system be able to slice and analyze your financial and operational data in the way the makes the most sense for your organization, manage changing compliance requirements, and balance cash inflows and outflows to avoid overspending. Beyond compliance, many nonprofits find that having financial insight is critical in demonstrating to valued donors that their contributions are being used wisely to encourage continued support.

Cloud Architecture
Any modern nonprofit accounting system must be cloud-based, which allows the organization  to lower IT costs, reduce technology risks, and improve productivity. Increasing numbers of organizations across industries are recognizing the value of cloud-based systems, but they are particularly vital for nonprofits that largely operate on-the-go and on-the-ground with the communities they’re serving. On-premise systems simply aren’t nimble enough to meet this need. Using the cloud also gives the organization the flexibility to choose best-in-class solutions that focus on ease of integration with other leading software solutions to meet your needs in each focus area versus using a suite, which makes external integrations difficult. A best-in-class cloud accounting system delivers scalability and performance, self-service reports and custom dashboards, and automatic software updates.

The Right Partner
Finally, one critical piece of choosing an accounting software system is evaluating at the company providing the software with the goal of choosing a true partner. Be sure to work with an organization that is committed to providing you with a world-class accounting system, not just a suite of software and services. Your accounting system should come from a company that has a proven track record with happy customers and a documented ability to serve the nonprofit sector specifically. Your nonprofit organization will ultimately be more successful for it.

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