Stepping Up to a Permanent Nonprofit
Accounting Software Solution
Presented by
NFP Partners
Introductions
• About NFP Partners
• About you
 Organization,
 Position
 Why are you here?
Agenda
• Fundamental differences – commercial vs. nonprofit
accounting
• What is fund accounting?
• When is entry-level accounting software an adequate
fit?
• Reasons for upgrading to specialized nonprofit
accounting software
• Demo of some expected features in nonprofit software
• The main players and purchase – deployment models
• Planning for the transition
Fundamental Differences – Commercial
vs. Nonprofit Accounting
• Profit vs. social benefit motive
 For profit entities maximize return on owner’s
investment (profit)
Nonprofit entities success measured by outcomes and
efficiency in delivery (budget performance)
• Nonprofits must account for donor interests
Major donors
Grantors (private and public)
• Not cut and dried, some degree of hybridization
usually present
What is Fund Accounting
• Widely misunderstood and interpreted
• For government a stricter understanding
 Self-balancing accounting entities
Required by law or GAAP
• For nonprofits a wider definition
 Usually in reference to tracking restricted fund
sources in net asset (equity) section
Self-balancing not a hard requirement, but
sometimes used
When Is Entry-level Accounting Software
an Adequate Fit for Nonprofit?
• Small – low dollar and transaction volume
• Limited growth potential
• Operate more like a business (program
services main revenue source)
• Limited funding sources and few restrictions
• Bookkeeping competence and oversight
Reasons for Upgrading to Specialized Nonprofit
Accounting Software
• Usually within context of organizational
growth and recognition of resulting
dysfunction
• Major determinates:
 Inadequate account capacity
 Inadequate budgeting and forecasting tools
 Inadequate reporting
• Others reasons that make a difference
Account Capacity
• Entry-level software usually allows no more
than three coding objects:
Main account (A,L,NA,R,E)
Sub-account-1 – usually used for program or
function (QB class code)
Sub-account-2 – may be used for project or
specific fund source (e.g., grant) (QB job code)
 Going beyond requires creativity and leads to
reporting malaise
Account Capacity (cont)
• Specialized nonprofit accounting software
removes the constraints.
• As many accounting code objects as required:
 Fund
 General Ledger (normal account)
 Program or function
 Funding source (grants and other sources that require
tracking and reporting
 Department or responsibility/cost center
 Projects (events, campaigns, etc.)
 FASB117 (restrictions and designations of net assets)
 And more…
Budgeting and Forecasting Tools
• Entry-level software provides limited capabilities:
 Usually a single-year revenue and expense budget
 Forecasting off-line
 No budget control tools (alerts, encumbrances)
• Specialized nonprofit software removes constraints
and adds features:
 Current/future years operating, cash, and capital budgets
 Decentralized budget creation and tracking tools
 Cross-FY budgets by fund source (e.g., grants)
 Multi-year forecasts
 Budget audit trail
Reporting & Data Analysis
• Entry-level accounting software
 Handles the basics within its limited account structure
 Nonprofit GAAP-compliant financial statement require
workarounds
 Excel is the default report writer
• Nonprofit specialized software
 Expands reporting breadth across full accounting spectrum
 Multi-dimensional reporting
 Customization features built-in
 GAAP requirements for SFP, SA, SCF, and SFE normalized
 Amenable to 3rd party reporting and data-mining tools
Some Other Reasons for Upgrading
•
•
•
•
•
Indirect cost allocation
Auditability
Access security and internal control features
System integration
Personal preference
Demo
•
•
•
•
Account structure features
Account distribution
Reporting flexibility
GAAP compliance
Nonprofit Accounting Software Main Players and
How Sold and Deployed
Vendor - Software
Browser-based
How Sold
How Deployed
Perpetual
License
SaaS
On-premises Vendor-hosted
Abila MIP Fund Accounting
No
X
X
X
X
Blackbaud Financial Edge
No
X
X
X
X
Intacct
Yes
X
X
Accufund Anywhere
Yes
X
X
3-party
Hosted
X
Planning for the Transition
• Get realistic; adjust attitude on price; usually dealing with
organizational transition
• Be prepared to justify the investment to board and get it in
the budget:
 Staff time spent on extra work outside the system that could be
saved and re-deployed
 Compliance with GAAP and following best practices
 Opportunity cost of missed revenue opportunities
 Audit and internal control issues
 Risk of fraud or misallocation of assets
 Frame in an organizational growth context
 Value of better strategic decisions based on accurate, relevant
and timely information
Planning for the Transition (cont)
•
•
•
•
Evaluate needs – what are the 3-4 main issues to solve
Consider organization and personnel
Appoint lead person for project
Frame acceptable alternatives (see previous chart)




•
•
•
•
Hosted on-premises (In-house)
Hosted remotely (the ‘cloud’)
Web-based
Client-server
Find potential providers (Web, peers, published reviews)
Hold preliminary conversations with vendor or VARs
Attend overview demos
Get preliminary pricing
Planning for the Transition (cont)
• Ask for references of similar organizations
• Narrow the field to one or two potential solution
sources
• Share time and information with providers
• Prepare a needs analysis
• Have software demonstrated to address main issues
• Select provider
• Finalize agreement
• Develop implementation plan