Where most businesses are built with economic value in mind, nonprofit organizations are all about social impact. Driven by the goal of helping others instead of money, these businesses are often community-owned and funded by donations. This comes with a whole host of challenges.
Nonprofits face budget constraints due to unreliable funding, and managing donors effectively is essential to keeping them afloat. Plus, they have to follow strict legal protocols to avoid paying taxes.
However, modern technology has revolutionized accounting software for nonprofits. These platforms can provide features beyond those needed by regular companies, such as clear and accurate financial reports, automatic regulation compliance, and donation tracking.
Join us as we reveal key tips for finding the right solution, our recommendations for free online accounting platforms for nonprofits, and how to implement this software into your workflow.
At first glance, Canada-based online accounting solution Wave is nothing special: you can do invoicing, create estimates, bills, add your clients, vendors, products, upload receipts, and check some reports. Upon further examination you will see that the user interface is rather blank; you have to pay for certain additional features, even for live chat and phone support, no profit & loss reports are created, and you are mostly unable to access your account from a mobile device. These all should be warning signs to avoid the software. But Wave has a huge advantage over its competitors: it provides all the major features for every single user free of charge. Furthermore, you can cancel your account any time you want. Therefore, if you are not satisfied with Wave’s services, you lose nothing. If you are a sole proprietor or an owner of a small business and you want to get accounting software that knows the basics without spending a fortune, then Wave may be worth a try.
It is quite unbelievable that U.S.-based online accounting company Intuit Inc. has already been on the market since 1983. But the success of its main product, QuickBooks Online shows that they aren’t just simply lucky. The software exists as downloadable software for desktops, and a cloud-based accounting solution dubbed QuickBooks Online, which the company quite aggressively promotes. This latter version, of which we will be talking about, is ideal for everybody from simple sole-proprietors to bigger companies. Regardless of the chosen subscription, you can create invoices, expenses, and estimates with a few clicks, quickly manage sales receipts, create and print checks, payrolls, have multiple tax rates, real-time banking and reports. You can integrate the software with over 300 third-party solutions, and be entitled to full customer support. You also have the option to try out the software completely free of charge for 30 days. Skipping this trial period you get a discount from the monthly subscription fee for six months or a whole year. But if you don’t like the software, you still have a 60-day money back guarantee.
Xero is a progressive and innovative online accounting solution that enables you to manage your accounts more effectively and make your accounting hassle-free. Some of its features include invoicing and quotes, bank reconciliation, inventory, mobile capability, third-party apps, purchase orders and payroll. The mobile version of the software, Xero Touch, makes it possible to access all your accounting data instantly from wherever you may be. Xero integrates and works well with many other third-party applications (such as advanced solutions for CRM, point-of-sale, e-commerce and more). You have a choice of three pricing plans – Starter, Standard and Premium – all of which have slightly different features and a reduced price for the first six months. Xero also provides a 30-day free trial. Customers enjoy efficient and reliable support from Xero online teams. Xero’s US headquarters is in San Francisco, but this publicly listed company’s products are used in over 180 countries. The company has garnered impressive experience in the area of cloud computing and accounting and has continued to innovate and create new products for the market.
While ease of use and scalability are key considerations with any software, certain online accounting features specifically benefit nonprofit organizations and should be prioritized:
It’s common for not-for-profit companies to receive general funds that can be spent however the organization sees fit, alongside restricted funds that must be used for specific purposes. Plenty of financial software offers fund tracking designed for nonprofits, keeping accounts separate and organized.
With limited and unreliable finances, nonprofits need to budget meticulously and can benefit hugely from digital tools that plan, track, and analyze projected budgets against actual expenditures.
There are plenty of solutions for nonprofits that aid in managing donors, fundraising, and bookkeeping. However, the accounting software chosen must integrate seamlessly with all your core software, from CRM to fundraising platforms.
Delivering detailed reports on how donors’ funds have been spent is essential for complete transparency. Nonprofit accounting software generates fund balance, income and expense, grant spending, and grant compliance reports, which are crucial for staying compliant with donor restrictions and regulatory bodies.
Charities and similar organizations rely on volunteers, and although this removes the hassle of payroll, there are still protocols to carefully follow. Accounting systems that track volunteer hours and expense reimbursement make administrators’ lives much easier.
Free accounting programs are certainly appealing to nonprofits, especially if funds are limited. While free budget software is a fantastic option, there are some downsides:
Free accounting software may be the way to go if all you need are the basics, like expense tracking, simple reporting, and budgeting tools. However, you should verify what you need, as advanced features like specialized reporting, donation management, and volunteer expense tracking are usually locked behind a paywall. With a freemium account, you may not realize until too late that additional vital features like integrations involve hidden fees.
There’s no need to rule out free or freemium subscriptions, but just keep in mind three crucial tips before signing up:
Our best free accounting software for nonprofits recommendations are:
Assess your company’s size and complexity. Where smaller organizations can get away with free or low-cost solutions, mid and large-sized nonprofits will need the features only found in paid subscriptions.
Check reporting and compliance capabilities. Nonprofit-specific reporting, which includes tax forms and donor report generation, is a must. This is one of the main reasons for using accounting software, so don’t skip on researching the details.
Evaluate your budget and your must-haves. Weigh up how much your company can afford to spend on accounting software and which features are worth shelling out for.
Once you’ve decided on your accounting software for a nonprofit organization, there are a few best practices to kick things off right.
Before using the new platform, ensure all important data, from financial reports to volunteer expense records, is backed up and carefully migrated into the new system.
Next, categorize restricted and unrestricted funds, expenses, and other data in a chart of accounts. This will ensure that everything is tracked and monitored accurately from the beginning.
Once the new workflow has been tested, it’s time to onboard employees and volunteers following a well-designed training plan. Getting this right from day one will save you time and hassle further down the line.
As you get to know the platform better, you’ll see how to best use automation. With charity accounting software, it’s straightforward to set up automatic billing, invoicing, and report scheduling.
After the rollout is complete and the software is fully in action, remember to periodically conduct internal audits to maintain accuracy and transparency in financial records. Keep checking in with team members to see how they find the new system and if any tweaks are necessary.
There may seem like too many online accounting solutions to choose from, but looking for nonprofit-specific features can narrow down the search significantly. Plenty of free and low-cost services, like Wave Accounting and GnuCash, can take care of core accounting processes for small organizations. If your company is scaling up and your demands are increasing, a Quickbooks Online or Xero subscription can unlock all kinds of advanced tools.
The best way to know which bookkeeping software is right for you is to test-drive various products using free trials and money-back guarantees. However, always look for specialized tools to guarantee that your not-for-profit needs are catered to.
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