Non Profit Software
Published January 07th, 2017 by

How Organizations Can Benefit From Nonprofit Accounting Software

How Organizations Can Benefit From Nonprofit Accounting Software

Helping those who are in need is one of the best feelings in the world. As the saying goes, “it’s better to give than to receive.” But for some people, giving alms to the poor is not enough. If they could, they would give more than what they earn. However, it’s quite impossible to give everything that you have. You still need money to live.

Fortunately, you can now give more to the needy. You simply need to start a non-profit organization. As the name suggests, this company doesn’t need an investment. The way to thrive is through the contributions of others. People will start giving funds and donations, which you will give to those who need help.

However, owning a non-profit company is like owning a business. You still need to manage the firm, as well as the people who are working with you. Furthermore, you need to manage all the funds and donations that you receive.

Unfortunately, managing both in-kind and cash contributions is not easy. Good thing there is a tool that lets you manage all the donations that you receive. The program we are referring to is the nonprofit software, otherwise known as the nonprofit accounting.

There are many fundraising software products in the market, but why should you use this program? In this post, we will discuss the importance of this software for nonprofits. We will also tell you the difference between a non-profit and the for-profit system. But first, you need to know the meaning and the purpose of this tool.

Hence, we will not keep you waiting any longer. Let’s begin the discussion!

A Brief Explanation of Nonprofit Accounting

When you hear the word “non-profit,” the first thing that comes to your mind is the charitable institutions. However, the scope of this term doesn’t end in the organizations. This word also refers to a computer program. It is a tool that monitors the contributions received by the firm.

However, there is another description of this system. According to, non-profit accounting is a method of record keeping. This tool allows the organization to be exempted from paying taxes.

Generally speaking, non-profit accounting software doesn’t depend on the investors and profits. Furthermore, it doesn’t have commercial owners. It only relies on the funds provided by the people they don’t know. The only thing that this software does is to monitor the donations and to record the financial statements.

What Makes it Different From the For-Profit Accounting?

While the aspects of nonprofit and for-profit solutions are the same, there’s a huge difference between these systems. First is the function of these tools. For-profit software monitors the revenues of the business. Non-profit, on the other hand, lists expenses of the organization, from the management to program units. These expenses are called functional costs, and the IRS asks for this statement.

This requirement also features the value of creating a cost allocation plan. As the name suggests, it is a scheme that explains how you will designate the funds across the institution. It also tells you how you should spend it on a particular program.

For instance, the administrative unit gets 20 percent of your workplace. You may need to give at least 20 percent of the funds to buy office tools. In that way, they can work on their tasks without worrying about their resources.

The cost allocation program is useful in determining the overall value of the program or activity. It also gives a clearer insight into the financial status of the organization.

There are several methods used for nonprofit accounting. You can use the direct/indirect cost application or the cost allocation plan. Using both methods will be more appropriate. However, you need to consult an accountant first to ensure you use the best approach for your institution.

Other crucial aspects are drafted by the Financial Accounting Standard Board (FASB). It is a nonprofit company administered by the Security and Exchange Commission. This organization defines accounting measures in America. One of which is the Statement of Financial Accounting Standards No. 116. This statement sets the following rules:

  1. Contribution Revenues – This standard tells how and when to accept earned profits. This measure includes donations, pledges, in-kind contributions, and restricted and unrestricted funds.
  2. The Value of Donated Services – This standard refers to the number of hours you’ve spent on giving your service. This volunteer time can be added to your statement. However, you can only include it in the financial statement if it meets the following requirements:
  3. If the donated service improves or creates nonfinancial assets.
  4. If it needs special skills. Meaning, the institution needs a person who can work on a particular task. The service of this individual can be hired by the company or donated for free.

Another crucial matter for nonprofit accounting, but not for for-profit, is the reporting of restricted funds. Although for-profit needs an update regarding the company’s revenues, it doesn’t need a report of restricted contributions. This statement is exclusively for nonprofit accounting. Its purpose is to give information to the donor about the status of his donations. Moreover, it enables the staff to check if there are enough funds for a particular program or activity.

How Can a Business Benefit From This Platform?

According to, there are three types of donor software that every nonprofit institution should be using. Your choice of the platform depends on what you need. But the question is why should you get the nonprofit software? Here are some of the reasons to use this program:

  1. It Has a Single Database for All Fund Information.

When doing a report, you need to get as much information as you need to make it accurate. If you miss a detail, the IRS will assume that your nonprofit business is a fraud. However, getting data from different sources is not easy. You have to visit each database and check the accuracy of your financial statement. Yes, it would take a lot of time, but you still need to do it to create a steadfast report.

Fortunately, you don’t need to visit each source anymore. The fund accounting software has a single database where all the necessary information is found. You simply need to open the source and get the data that you need for your statement.

  1. It Provides Understandable and Relatable Terms.

Nonprofit organizations deal with specific terms that a basic tool cannot address. Moreover, basic platforms are specifically developed for general businesses. Hence, if your firm is a nonprofit institution, it will be difficult for the basic system to provide the necessary information.

For this reason, you need to get a tool that is specifically made for nonprofit units. In that way, users can understand what they are doing and improve accountability and accuracy.

  1. It Monitors Revenues, Expenses, and Payroll of Each Department, Location, and Project.

Though your business is a charitable institution, it doesn’t mean you don’t get revenues and expenses from it. Because you have staff and organized some fundraising programs, you need to spend cash and earn money to survive.

This is where the nonprofit fundraising software comes in handy. This tool tracks the money you get from your activity. At the same time, it monitors your expenses and payroll by unit, place, or project. Hence, you will have an idea of the amount of money you have left.

  1. It Eliminates Corruption.

Because nonprofit organizations receive a hefty amount of cash monthly, it’s quite tempting to get some funds for personal use. However, this action is a big NO-NO! These accumulated funds are intended for those who need it. Still, there are some who get money from these resources without your knowledge.

Fortunately, you can now track the inventory of your organization. You simply need to get the donation software. This tool has an audit trail that records every transaction you made. With this feature, you will know if someone takes money from your sources.

  1. It Promotes Budgeting Flexibility.

All budding charitable institutions start with a small budget. As the months go by, the financial plan changes, depending on circumstances. For this reason, the IRS, along with the organization’s admin, wants to see the original and the latest financial statements. In that way, they can compare the reports and revise what needs to be changed.

These are just some of the benefits you will get from a nonprofit system. With this program, you can give more than what the needy people ask for. However, you can only enjoy these perks and more if you get the right tool for your business. So make sure you do your research first before buying this package.

Lastly, don’t forget to read some of the best nonprofit software reviews. These write-ups give you unbiased opinions about a particular brand. However, you need to make sure that the critiques come from a reliable source.

Do you want to know what the best nonprofit accounting software on the market is? Check out and read our reviews of nonprofit software.

Our rankings are completely independent, transparent, and community driven; they are based on user reviews and client sentiment. These non profit software companies had to earn their way up and didn't just pay their way up.

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