Nonprofit fund accounting can be simple with Unit4
The Nonprofit fund management process is about more than just donor and impact reporting, but to understand how to do more with its funds, while remaining compliant with accounting standards, to maximize the impact of the valuable work the organization does.
Instead, they may assign the task to a staff member or volunteer with a finance background, which can run the risk of noncompliance due to a lack of detailed or accredited accounting knowledge.
In this blog, we look at how Unit4’s cloud-based financial planning and analysis (FP&A) and financial management software can take away the pain for accounting teams and provide a simple platform to manage funds easily, and much more – both for less-technical volunteers and for financial professionals.
What do nonprofit organizations need from fund accounting software?
It doesn’t matter who manages the books; all nonprofits need an accounting system to keep track of everything to ensure they are prepared to report financial activities, not just to donors and stakeholders, but to financial authorities interested in how funds are used and allocated.
Nonprofits should look for digital accounting software that covers general bookkeeping and accounting, as well as specific nonprofit needs such as donor management, compliance management, and grant management.
Nonprofit accounting, which varies slightly by country, could include:
- Setting and adapting a budget
- Analyzing financial records and statements
- Recording transactions such as in-kind donations
- Managing various bank accounts
- Bank reconciliations, and more
Budgets
A budget may look different for nonprofits as they generate income from donations and grants. A budget will dictate the level of impact a nonprofit organization can deliver and assess its current financial health.
Budgets may be requested by parties involved in financial transactions with nonprofits, such as banks, donors, or those considering a gift to the organization.
The budget will be reviewed and compared to the actual cash flow and expenses to determine whether they align as expected and support the nonprofit in delivering impact. In today’s financial climate, budgets often need midterm adjustments and require flexible capabilities to adapt with agility.
Creating flexible, accurate budgets with real-time data is tough with legacy systems, especially for non-technical financial staff. Fund accounting software is key to empowering easy management of funds and creating more time for impactful work.
Click to read Optimize Your Funding Allocation with ERP (gated)
Financial records and statements
Financial records and statements help to keep track of how donations and grants are used. These statements keep a record of all accounts and expenses generated over time and are vital for donor reporting and compliance.
For accounting and taxation purposes, nonprofits will benefit from digital tools that generate financial statements automatically, rather than manual creation, and provide simple ways to manage statements.
Balance sheets
For tax-exempt organizations, the balance sheet is also known as the statement of financial position. This statement shows what the company owns and owes at a specific date. Think of it as a picture of the financial situation at one point in time. This is another key part of fund accounting that is tough with manual processes and even tougher for less experienced volunteers.
With automated processes and integrated data, this can be generated in a few clicks, with confidence that the information is accurate and up to date.
Income Statements
An income statement is also known as a statement of activities for nonprofit organizations. It shows all the financial activity of the organization and the financial results of its campaigns.
Unlike the balance sheet, which is a snapshot at a single point in time, an income statement shows what happens over a period of time.
This requires complex calculations, manual data entry, and data consolidation, which is challenging with fragmented systems and harder without experience. A digital accounting solution can simplify this.
Managing multiple bank accounts
A nonprofit may have multiple accounts and banking applications. When a financial activity occurs, teams may juggle multiple fragmented systems to collect data, making reconciliation prone to errors and inaccuracies.
A digital accounting solution provides a single repository for data and a single source of truth, reducing complexity for accounting staff and ensuring they have the data they need at their fingertips.
How Unit4 can make fund accounting simple for nonprofits
Our purpose-built solutions transform work, so your people gain the time and flexibility to focus on achieving your mission. Not only does it ensure greater financial credibility, but it enables organizations to align financial proceedings with their missions and regulatory requirements.
The Unit4 FP&A solution has been specifically designed with the planning and analysis needs of nonprofits in mind. At its core is a powerful, pre-configured integration to Unit4’s ERP, connecting nonprofit operational data with strategic planning capabilities to support and simplify key financial operations.
Different-sized nonprofit organizations may prefer Unit4’s Financial Management solutions – ERP Financials for mid-sized enterprises, or Unit4’s best-of-breed solution Financials by Coda for larger enterprises – providing visibility of the entire record-to-report cycle through a single integrated financial management solution.
To learn more about how Unit4 can help, explore the nonprofit-specific capabilities offered in our Fund Accounting capability datasheet, or talk to sales directly today!
