the Right Accounting Technology for Nonprofits
organizations consider accounting technology, they face unique
issues and challenges. Most small to mid-sized nonprofits
lack full-time accounting staff, and few can afford to hire
a CPA. Some organizations depend on volunteers for weekly
or monthly entering of accounting data.
use of the Internet and Microsoft Office programs has made
this less of a problem. Before the era of technology grants,
most nonprofits depended on donations to fill their hardware
and software needs, causing many to scrape by with loosely
networked, rarely updated systems. Now, as technology grants
have become more common and most hardware and software has
become more affordable, this area is improving.
reporting requirements and a conscious effort by many nonprofits
to diversify their funding bases has fueled a need for more
sophisticated accounting solutions, while at the same time
demanding that providers offer solutions that are easy to
use. This has caused many technology providers to create
customized software packages tailored specifically to the
needs of nonprofit organizations.
Fund Accounting, from Best Software (www.bestsoftware.com),
is a good fit for mid- to large-sized nonprofits with annual
operating budgets of $5 million to $15 million. There are
three versions of the software—intro, pro, and advantage—which
accommodate from one to 100 users, and provide feature and
is an excellent fit for government organizations, as it
provides a variety of specific modules to produce reports
for government grants with industry rates. It also works
well for larger entities with a number of separate divisions
or departments, and contains “eRequisition,”
an application that allows nonusers to enter and approve
encumbrance application allows the organization to establish
planned expenditures for a given time period. Funds are
encumbered prior to actual expenditure, which allows a nonprofit
to accurately report available funds. As purchases are made,
they are updated to actual expenses, and reduce the encumbrances.
this system is more sophisticated, it requires a longer
setup time and more initial training. It has a process road-map
menu that is well designed and easy to navigate, with powerful
reporting capabilities. The chart of accounts is table driven,
allowing accounts to grow and change as needed.
Financial Edge, from Blackbaud, Inc. (www.blackbaud.com),
offers some of the most sophisticated, leading-edge accounting
technology available. It is best used in very large nonprofits,
such as those with an annual operating budget of more than
$15 million and a large staff.
system offers a myriad of functions. Schools and national
organizations that seek true integration with the popular
fundraising and donation software Raiser’s Edge (also
a Blackbaud product) would benefit from this system. Its
tight integration allows for the drill-down of information
from Financial Edge’s general ledger to the actual
source in the Raiser’s Edge.
Edge provides a number of business evaluation tools to analyze
data, projects, and grants, with each tool sold in separate
and complete modules. The analytical module, called Information
Edge, allows a number of analyses and reports to be completed.
A separate grant module is provided (rather than a segment
of the chart of accounts), with a media tab that allows
users to attach grant-award documents and correspondence.
any sophisticated system, Financial Edge is costly and requires
more setup time and staff training than simpler systems.
Its functionality is robust, however, and worth the extra
investment and effort.
from Open Systems (www.osas.com),
is a good fit for nonprofit organizations operating with
a budget of $5 million or less. Because Traverse is based
on the familiar Microsoft Access with a SQL database, it
is easier for the typical nonprofit to install and operate.
To help smaller organizations, Traverse comes with templates
for various required reports, and users can customize or
modify report layouts and contents.
has an open structure to track diverse funding sources.
For example, Traverse General Ledger has a flexible chart
of accounts that handles up to seven segment categories
and 30-character alphanumeric numbers to track funds, programs,
grants, activities, departments, and divisions. Traverse
also has a specific inventory system that can track sales,
inventory, back orders, purchasing, and other retail-related
functions, and includes an e-business shopping cart module
(with source code) that allows nonprofits to set up e-commerce
websites fairly easily.
was specifically developed for nonprofit organizations,
but also complements their commercial products and can be
integrated accordingly for nonprofits affiliated with for-profit
first step in choosing software is to thoroughly research
and analyze the organization’s requirements. Talk
directly with vendors to make sure the system is well supported
and can be customized for specific needs. The following
are important issues to consider:
Stay focused on products that have been specifically designed
for the nonprofit sector and provide the functionality
and capabilities required. Most commercial accounting
packages do not easily adapt to the requirements of nonprofit
Consider the effort required to learn the application.
Training and ongoing support often cost more than the
upfront cost of the package itself.
Maximize the staff’s current skills. Choose a product
that has the look and feel of products (e.g., Microsoft
Office) that they are already familiar with.
software with business analysis tools offers an extra
benefit for nonprofits: the ability to understand their
donor base. What is their giving history? What programs
interest a particular donor? How is the donor related
to other donors and organizations? These tools enable
a nonprofit to provide as much personalization as possible.
As government scrutiny of nonprofits has increased, organizations
must be able to report their accounting position accurately.
Make sure each potential vendor demonstrates how required
reports are created, changed, or customized. Nonprofits
should make sure their required reports are available
without being created from scratch.
From a large list of available nonprofit systems, narrow
the selection down to no more than three. A spreadsheet
can be used to compare features, available reports, ease
of use, and cost.
A budget-conscious organization should separate must-have
features from nice-to-have features. Do not rule out a
competitively priced solution that meets the functional
requirements. When analyzing expenses, along with the
time involved, always consider the long-term return on
Lundquist is vice president of sales for Open Systems,
whose flagship product, Traverse, provides customized accounting
technology solutions for nonprofit organizations.