Presented by

NFP Partners

Stepping Up to a Permanent Nonprofit Accounting Software Solution

Introductions

• About NFP Partners• About you

Organization, Position Why are you here?

Agenda• Fundamental differences – commercial vs. nonprofit

accounting• What is fund accounting?• When is entry-level accounting software an adequate

fit?• Reasons for upgrading to specialized nonprofit

accounting software• Demo of some expected features in nonprofit software• The main players and purchase – deployment models• Planning for the transition

Fundamental Differences – Commercial vs. Nonprofit Accounting

• Profit vs. social benefit motive For profit entities maximize return on owner’s investment

(profit)Nonprofit entities success measured by outcomes and

efficiency in delivery (budget performance)• Nonprofits must account for donor interests

Major donorsGrantors (private and public)

• Not cut and dried, some degree of hybridization usually present

What is Fund Accounting• Widely misunderstood and interpreted• For government a stricter understanding

Self-balancing accounting entitiesRequired by law or GAAP

• For nonprofits a wider definition Usually in reference to tracking restricted fund

sources in net asset (equity) section Self-balancing not a hard requirement, but

sometimes used

When Is Entry-level Accounting Software an Adequate Fit for Nonprofit?

• Small – low dollar and transaction volume• Limited growth potential• Operate more like a business (program

services main revenue source)• Limited funding sources and few restrictions• Bookkeeping competence and oversight

Reasons for Upgrading to Specialized Nonprofit Accounting Software

• Usually within context of organizational growth and recognition of resulting dysfunction

• Major determinates: Inadequate account capacity Inadequate budgeting and forecasting tools Inadequate reporting

• Others reasons that make a difference

Account Capacity

• Entry-level software usually allows no more than three coding objects:Main account (A,L,NA,R,E) Sub-account-1 – usually used for program or

function (QB class code)Sub-account-2 – may be used for project or

specific fund source (e.g., grant) (QB job code) Going beyond requires creativity and leads to

reporting malaise

Account Capacity (cont)• Specialized nonprofit accounting software removes the

constraints.• As many accounting code objects as required:

FundGeneral Ledger (normal account)Program or function Funding source (grants and other sources that require tracking

and reportingDepartment or responsibility/cost centerProjects (events, campaigns, etc.) FASB117 (restrictions and designations of net assets) And more…

Budgeting and Forecasting Tools• Entry-level software provides limited capabilities:

Usually a single-year revenue and expense budget Forecasting off-line No budget control tools (alerts, encumbrances)

• Specialized nonprofit software removes constraints and adds features:Current/future years operating, cash, and capital budgets Decentralized budget creation and tracking toolsCross-FY budgets by fund source (e.g., grants)Multi-year forecasts Budget audit trail

Reporting & Data Analysis• Entry-level accounting software

Handles the basics within its limited account structure Nonprofit GAAP-compliant financial statement require

workarounds Excel is the default report writer

• Nonprofit specialized software Expands reporting breadth across full accounting spectrum Multi-dimensional reporting Customization features built-in GAAP requirements for SFP, SA, SCF, and SFE normalized Amenable to 3rd party reporting and data-mining tools

Some Other Reasons for Upgrading

• Indirect cost allocation• Auditability• Access security and internal control features• System integration • Personal preference

Demo

• Account structure features• Account distribution• Reporting flexibility• GAAP compliance

Nonprofit Accounting Software Main Players and How Sold and Deployed

Vendor - Software Browser-based How Sold How Deployed

Perpetual

License SaaS On-premises Vendor-hosted3-party Hosted

Abila MIP Fund Accounting No X X X X X

Blackbaud Financial Edge No X X X X

Intacct Yes X X

Accufund Anywhere Yes X X

Planning for the Transition• Get realistic; adjust attitude on price; usually dealing with

organizational transition• Be prepared to justify the investment to board and get it in

the budget: Staff time spent on extra work outside the system that could be

saved and re-deployed Compliance with GAAP and following best practices Opportunity cost of missed revenue opportunities Audit and internal control issues Risk of fraud or misallocation of assets Frame in an organizational growth context Value of better strategic decisions based on accurate, relevant

and timely information

Planning for the Transition (cont)

• Evaluate needs – what are the 3-4 main issues to solve• Consider organization and personnel• Appoint lead person for project • Frame acceptable alternatives (see previous chart)

Hosted on-premises (In-house) Hosted remotely (the ‘cloud’) Web-based Client-server

• Find potential providers (Web, peers, published reviews)• Hold preliminary conversations with vendor or VARs• Attend overview demos• Get preliminary pricing

Planning for the Transition (cont)• Ask for references of similar organizations• Narrow the field to one or two potential solution

sources• Share time and information with providers• Prepare a needs analysis• Have software demonstrated to address main issues• Select provider• Finalize agreement• Develop implementation plan