What type of organization should use an accounting package? The consultants we talked to agreed: almost every nonprofit can benefit from one. Even if you work for a small organization that makes only a few basic transactions a month—deposits, withdrawals, and invoices, for example—an application like Microsoft Excel may not be enough. Truth be told, Excel is dangerous as an accounting tool, as there are no built-in safeguards to keep you from deleting a transaction or accidentally duplicating a line on a report.
The increasing popularity of self-service financial technology tools has led to improved options for the smallest nonprofits. Many banks now offer reporting tools as part of their online banking packages, or as add-on modules. Users can associate certain vendors with a specific expense type—for instance, to connect USPS charges with “Postage.” These banking tools typically aren’t very good at differentiating different types of revenue, but if your organization is very small and has just a few transactions per month, this kind of service might support your needs. However, a dedicated package is a better fit for most organizations.
Once you’ve decided you need an accounting system, it’s time to review your options. It’s important to consider whether the package you purchase will integrate with the constituent management solution your organization uses—whether that’s a donor management tool, an association management package, or a CRM. Seamless integration might save you hours summarizing and entering data. Ideally, your constituent management software should serve as your accounts receivable sub-ledger—a record of the transaction and payment history for every person or organization who gives you money or pays you for services. Your accounting system should serve as your general ledger, tracking balances as well as your accounts payable, payroll, inventory, and reports. Periodically—daily, weekly, or monthly—you should reconcile your accounts receivable sub-ledger against your general ledger to ensure accuracy in your books.
Learning to use new accounting software can be daunting, but in the long run it will save you a considerable amount of time. Most accounting packages allow you to create new reports—like a cash-flow summary or information for your IRS Form 990—at the touch of a button. And many will update your accounts automatically when you write a check or create an invoice.
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