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Helping nonprofits become stronger financial managers.

April 23, 2014

Stepping Up to New Accounting Software – How It Really Works

NFP Partners has been working with nonprofit organizations for over seven years, providing accounting software tools and added-value services. Our initial focus was on nonprofits that had outgrown their entry-level accounting software, such as QuickBooks or Sage 50 (formerly Peachtree), or were using commercial software that was not suited to handle nonprofit accounting differences. Coming from the private sector, adapting to the nonprofit world was a steeper slope than we had first imagined. Similar to private businesses, a nonprofit software purchase is usually a “have to” and seldom a “want to" decision. However, for nonprofits, the process is much slower. Often, budgeting and funding for back office software is not a high priority and plans are subject to derailment as higher perceived needs arise. So, there’s a tendency to get by as long as possible with the existing software until it’s simply an unsustainable situation. It’s not unusual that organizational change accompanies these types of decisions.

This article addresses why nonprofits eventually migrate to a more robust accounting system. On April 24th, I will present our revised webinar on this topic that will include a suggested strategy and practical steps in implementing new accounting software. It’s not too late to register and it will be schedule for future dates. The webinar will be informative, truthful and helpful for nonprofit financial managers who want to help their organization succeed.

To dispel one impression, QuickBooks is not a pejorative for us. In fact, we endorse it and other entry-level software as satisfactory tools for small- to mid-size nonprofits. We use the QuickBooks Enterprise edition hosted by our private cloud service for many of our outsourced accounting clients. QuickBooks has become the default software for small businesses and nonprofits since it is user-friendly and has some feature-sets that other more advanced accounting software may not have (e.g., integrated credit card processing).  It can serve as a permanent tool for organizations with stagnant growth, along with those that operate more like private businesses with revenues derived from selling goods or services. We have seen nonprofit accountants and bookkeepers, who know how to use QuickBooks, perform some pretty magical things, pushing it beyond its intended limits. There’s a natural human resistance to change, and unfortunately, their good intentions can become a disservice to the organization.

Abila, the software vendor for MIP Fund Accounting, published a white paper, “Ten Reasons Nonprofits Need Fund Accounting.” The 10 reasons can be boiled down to three or four main ones. The term, "fund accounting," causes some confusion. The traditional definition stems from government where funds are self-balancing accounting entities within a government organization that are statutorily prescribed for a government organization. Think general fund, utility fund, etc. However, the term is less precise when it is applied to nonprofit organizations. Nonprofits can have self-balancing accounting entities that generate both revenue and expenditure reports and a balance sheet that are established by the Board of Directors (e.g., capital campaign fund, federal or state grant fund, etc.). More typically, it’s used in reference to accounting for revenue sources that are restricted for certain purposes or have a time expiration. Usually these are grants, large donor contributions and endowments. The balance of assets over the life of the funding is shown in the Net Asset section of the Statement of Financial position, but is not a self-balancing accounting entity. Some accountants refer to this as net asset accounting rather than fund accounting.

Nonprofit organizations outgrow their accounting software for 3 main reasons:

  • Too many accounting objects to track
  • More robust and flexible budgeting and forecasting
  • More comprehensive and flexible reporting and data analysis

Read More

Please feel free to contact me at 303-367-1058 with any comments or questions.
 

Warm Regards,


Lee Bengston

Financial Management Best Practice of the Month
 

NFP Partners recently accepted an invitation from SVP (Social Venture Partners) of Boulder to make a presentation to nonprofit executive directors on financial management best practices. As a result, we will take the time to cast our net wider and deliver a list of the most consequential practices to our subscribers each month.

Here’s this month’s best FM practice, which is subject to revision as we compile our list. We recommend that the Board of Directors has a qualified financial professional who will provide oversight of the internal accounting and finance function as well as serve as the chair of the finance and audit committees (it may be impractical to have separate committees). This is especially relevant to small nonprofits with limited resources. If a qualified person is not available to serve as a Board member, the Board should recruit a qualified person to fulfill that role as an advisor, either on a voluntary or paid basis.

Read More
 

Articles of Interest
 

As an added feature to our newsletter, we list articles that we have run across which we feel are relevant to nonprofit financial management. They are not listed with any immediate editorial comment nor have we re-blogged them. Just click on the article to go to the source. You can go to our blog for a cumulative list of articles.
NFP Partners
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Denver, CO 80206


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Contact us for a financial management assessment and to find out more about how NFP Partners can help you.



Webinars


Stepping Up to a Permanent Nonprofit Accounting Software Solution
April 24, 2014 - 2:00pm MT
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Managing Nonprofit Financials for Greater Success
April 29, 2014 - 12:00pm MT
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May 6, 2014 - 12:00 MT
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May 13, 2014 - 12:00 MT
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May 20, 2014 - 12:00pm MT
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May 27, 2014 - 12:00pm MT
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How to Achieve Greater Fundraising Success!
May 6, 2014 - 10:00am MT
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May 13, 2014 - 10:00am MT
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May 20, 2014 - 10:00am MT
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May 27, 2014, 2014 - 10:00am MT
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Streamline Your Grant Management Process
May 7, 2014 - 1:00pm MT
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May 21, 2014 - 1:00pm MT
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Fundraising:  Make Stronger Connections with Supporters on the Web
May 14, 2014 - 10:00am MT
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May 21, 2014 - 10:00am MT
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Colorado Nonprofit Financial Manager Peer Group


The Colorado Nonprofit Financial Manager Peer Group is an educational networking groups for Colorado nonprofit finance professionals. Its purpose is to offer a forum for professionals in the field to network, exchange ideas and resources, and learn about best practices and new developments in the field of nonprofit accounting. Please visit the group's meet up site to register and view upcoming events.

Next Event:

CNFP Monthly Meeting - Endowments
Tuesday, May 27th, 2014
9:00am-11:00am
Mile High United Way

More Information

 
If you have questions, please contact Jessica Taylor at Jessica@nfppartners.com.


 

Last Friday MIP Bash


The results of our recent survey to MIP users indicate strong support for a virtual MIP forum. In response, NFP Partners is moderating the first session on Friday, April 25 at 10 AM MDT.

The virtual forum will facilitate the exchange of information and relationship building among MIP users to help them become more proficient in the use of the software and nonprofit accounting in general. The virtual format utilizes web conferencing technology to allow participation without having to leave your office.

The first forum, which will be moderated by NFP Partners, is devoted to setting up the framework for future sessions, including organization, rules, agenda development, and logistics. Although NFP will serve as the overall facilitator, we expect that interested participants will step forward and moderate future sessions.


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