Summary: In today’s podcast episode, Joseph Scarano from Araize and Stephen Halasnik from Financing Solutions discusses the benefits of implementing nonprofit accounting software. These solutions are helping nonprofit owners find the best industry-specific accounting software that will meet all of their organization’s financial reporting needs.
Using accounting software for nonprofit funding
Nonprofits often rely on donors to help fund activities that aid the communities they serve. Nonprofits benefit from having a system that integrates donor management applications with accounting software. Donor management systems and accounting software help nonprofits streamline their activities and provide donors transparency regarding their donation and how it is being used. The goal of a nonprofit accounting system is to provide adequate stewardship for its stakeholders. Nonprofit owners and board members have the responsibility of ensuring that any funding received be reinvested into the organization to follow through on its mission.
Some nonprofit employees work in multiple areas and receive salaries that are funded through various grants. Nonprofit owners then have the responsibility to allocate the employee’s salary to the specific areas or programs in which the employee has contributed when conducting accounting reports. Having an integrated donor reporting and accounting system makes it easier for nonprofit accountants, bookkeepers, and finance directors to properly distribute expenses to the appropriate grants and programs. Organizations are beginning to use application program interfaces (APIs) that use third-party applications to allow accounting and donor management systems to help pay bills through banks, fundraising through social media, and other finance managing activities.
Using the best nonprofit accounting software
Many nonprofits make the mistake of using accounting software made for for-profit industries. Using typical for-profit accounting systems such as QuickBooks or Peachtree requires nonprofit accountants to do more work to get accurate reports. The first level of reporting requires nonprofits to separate restricted and unrestricted funds. The next level requires nonprofits to segregate funding based on their functional areas such as support services or program services. For more complex organizations that have multiple programs and grantors, nonprofits must segregate their grant activities based on the grantors. Nonprofit accounting has more requirements for reporting than for-profit accounting, causing the need for more complex, industry-based accounting systems.
Nonprofit leaders should consider the experience of the company when choosing between accounting software companies to work with. Companies that have experience working with other nonprofit organizations should be considered prime candidates for collaboration. Companies with experience in the nonprofit sector are able to give industry-specific insights that other companies may not be aware of. Nonprofit accounting software acts as an electronic certified public accountant designed for the industry in which the organization serves. Accounting software companies such as Araize provide nonprofits with industry-specific software and the tools necessary to streamline accounting activities.
Nonprofits also benefit from reaching out to other nonprofits or the association of nonprofits for their state to see what software has worked best for other organizations. Nonprofits must also develop a requirements list that highlights the most important features to be included in the new accounting system. It is important to make note of the issues associated with the current accounting system to ensure specific solutions are put in place. It is essential for nonprofits to ensure their accounting software package is consistent with the Financial Accounting Standards Board (FASB) reporting requirements.
The future of nonprofit accounting software
Nonprofit and accounting software specialists predict that the future of nonprofit accounting will be led by artificial intelligence and machine learning. The software will eventually be able to recognize various sets of data and be able to classify and categorize data based on functionality.
While the human element of accounting review will most likely always be present, the increase in abilities of artificial intelligence and machine learning will reduce the time and human resources needed for accounting classifications.
About The Guest Joseph Scarano from Araize
Joseph Scarano is the CEO of Araize, a software provider for nonprofit organizations. He is an inactive CPA and has spent over 40 years providing accounting services and software to the nonprofit industry. He has served on numerous Nonprofit Boards as Treasurer.
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Nonprofit MBA Podcast. The Nonprofit MBA podcast’s purpose is to help nonprofit leaders. Stephen is the Co-founder and Managing Partner of Financing Solutions, a leading provider of loans for nonprofits in the form of Lines of Credit to nonprofits. Stephen is a best-selling Amazon author and is considered a leading authority on building great, purpose-driven businesses. Stephen lives in New Jersey with his wife, Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
10% of profits from Financing Solutions is donated to charity.