There’s a myth in the corporate world that running a nonprofit is somehow an easier, lighter lift than managing a “real” business. If anything, the financial management challenges that arise in nonprofits are more intense than what you see in the for-profit sector. Now, special versions of Enterprise Resource Planning (ERP) solutions like Acumatica are addressing this need with extensive nonprofit financial capabilities.
Why Nonprofits are Challenging, from a Financial Perspective
When you buy a product from a conventional business, you give them your money and get back whatever you ordered. If you’re happy, great. If you’re not pleased, you ask for a refund or a new product. In the nonprofit world, you’re playing by a totally different set of rules.
A nonprofit’s “customers” are its donors. These might be individuals or foundations. Unlike commercial customers, donors usually expect a high level of stewardship for their funds. Often, they want to know exactly how their money was spent. If there’s a problem, you seldom get to give a refund or request a do-over. You’re in trouble.
The government also conducts stringent audits on nonprofits. If a nonprofit is revealed to be engaged in self-dealing with its directors, for example, it can lose its tax-exempt status. For these reasons, accounting in nonprofits must be conducted with great care.
Nonprofit Accounting Functions
The Acumatica Nonprofit Accounting Suite is designed with the unique financial management requirements of a nonprofit in mind. It helps your organization demonstrate a high level of accountability to its donors and show proper stewardship of their funds.
- Fund Accounting – Acumatica enables you to track revenues that come with purpose restrictions against expenditures made for those purposes. For example, if a foundation specifies that a grant may only spent on scientific research, you have to show that this was how these funds were spent.
- Restricted Funds Management – Nonprofits are obligated, in legal terms, to honor directives concerning the use of their gifts. Acumatica lets you define and manage how cash is received and expended—without requiring a complicated data entry process.
- Grant Management – Grant management is sometimes viewed as an activity separate from accounting at a nonprofit. In practice, the two are deeply linked. Acumatica provides the basis to manage, track and report on grants. This can be done even when the grant’s life cycle goes beyond the financial year.
- Encumbrance Accounting – Acumatica features give you a clear picture of your organization’s true financial condition, taking into consideration the need to reserve funds for future obligations.
Nonprofit Accounting Suite offers nonprofits the ability to verify and validate budgets. Budget problems need to be detected and remediated early. You can implement this capability at set up, determining how and when users will be alerted if they are about to go over budget. The system can also set up approvers for “over budget” items.
What about your Board of Directors? They need to know the financial condition of the nonprofit just as much, or perhaps even more, than anyone else. The Acumatica Board Management Solution gives the board continuous access to relevant data about budgets, staffing, grants, restricted funds and so forth.
Nonprofit accounting doesn’t have to be difficult. With tools like Acumatica, you can stay on top of the unique requirements of nonprofit financial management.