According to a study conducted by the University of Notre Dame, nonprofit organizations face a lot of accounting challenges. In fact, after examining over 5,511 audited financial statements, researcher Dr. Jeffrey Burks found that public charities report errors at a rate that is 60% higher than that of publicly traded corporations — a worrying statistic that may very well result in nonprofit organizations failing.
After all, poor accounting and financial management can cause you to make errors in budgeting, spending, and goal setting. And if you want your nonprofit to succeed in the long run, then accounting and financial management should be a key focus. One concrete step you can take is to invest in the right accounting software, which automates financial functions and transactions.
However, with a lot of options to choose from, picking out the right one for your nonprofit organization can be quite tough. For this reason, this article will list a few tips that can assist you in selecting one:
Consult with your accountant
If there’s anyone who can provide you with an educated opinion about the best choice of accounting software for your particular organization, it’s your accountant. After all, if you look at this overview for online accounting degrees by Maryville University, you’ll see that graduates are trained not just in financial reporting and bookkeeping — they’re also taught about software and management, making their opinion an invaluable one in your selection process.
When consulting with your accountant, remember to ask about the functions that you should expect reliable accounting software to have. It would also be in your best interests to get their help in setting a software budget. After all, some accounting applications entail both initial and ongoing expenses such as upfront and annual license fees as well as staff time for implementation, conversion, and maintenance. It might also be a good idea to ask them what software they’re most comfortable using with your organization.
Understand your options
Accounting software comes in a variety of applications and complexities. As showcased in Small Business Trends’ list of accounting software, there are cheap or free cloud-based accounting solutions out there that are ideal for small organizations and can address simple accounting needs. However, it’s important to note that like many other free applications, accounting software like this often has limited features. At times, they may even lack critical functions and have hidden costs.
Of course, if there are free accounting applications, there are also ones that are competitively priced. This type of software is specifically built for large and complex organizations, and boasts specialized accounting features such as industry-specific functionality. For instance, our very own Nonprofit Accounting Suite has features that can manage grants, keep track of volunteers, report on donor income and activity, and engage leaders to raise financial awareness. These are features that you may not find in more generic types of accounting programs.
Ask around and gather feedback
Aside from seeking the opinion and advice of your accountant, it’s also incredibly important for you to have a discussion with the people that will be using the software. As highlighted in our previous post on ‘Running Your Own Nonprofit Accounting Software Selection Process’, you have to discuss current pain points with your staff that they may be experiencing. This way, you will be able to document the specific accounting-related processes that must be improved and reengineered.
When gathering feedback from stakeholders, encourage them to identify their “must-have” or “like-to-have” features. Such a simple step can be very beneficial in determining the functions that are necessary and not just nice additions. You can also take this opportunity to assess the skills of the accounting and tech support staff. You have to remember that even though accounting software can streamline a multitude of accounting processes, it is still just a tool that would require qualified personnel to run it.
Written by: Clarice Brown