Selecting the Right Accounting Technology for Nonprofits

By Lundquist, Paul | The CPA Journal, September 2004 | Go to article overview

Selecting the Right Accounting Technology for Nonprofits


Lundquist, Paul, The CPA Journal


When nonprofit organizations consider accounting technology, they face unique issues and challenges. Most small to mid-sized nonprofits lack full-time accounting staff, and few can afford to hire a CPA. Some organizations depend on volunteers for weekly or monthly entering of accounting data.

Widespread use of the Internet and Microsoft Office programs has made this less of a problem. Before the era of technology grants, most nonprofits depended on donations to fill their hardware and software needs, causing many to scrape by with loosely networked, rarely updated systems. Now, as technology grants have become more common and most hardware and software has become more affordable, this area is improving.

Additional reporting requirements and a conscious effort by many nonprofits to diversify their funding bases has fueled a need for more sophisticated accounting solutions, while at the same time demanding that providers offer solutions that are easy to use. This has caused many technology providers to create customized software packages tailored specifically to the needs of nonprofit organizations.

Nonprofit Accounting Solutions

MIP Fund Accounting, from Best Software (www.bestsoftware.com), is a good fit for mid- to large-sized nonprofits with annual operating budgets of $5 million to $15 million. There are three versions of the software-intro, pro, and advantage-which accommodate from one to 100 users, and provide feature and module restrictions.

MIP is an excellent fit for government organizations, as it provides a variety of specific modules to produce reports for government grants with industry rates. It also works well for larger entities with a number of separate divisions or departments, and contains "eRequisition," an application that allows nonusers to enter and approve requisitions.

The encumbrance application allows the organization to establish planned expenditures for a given time period. Funds are encumbered prior to actual expenditure, which allows a nonprofit to accurately report available funds. As purchases are made, they are updated to actual expenses, and reduce the encumbrances.

Because this system is more sophisticated, it requires a longer setup time and more initial training. It has a process road-map menu that is well designed and easy to navigate, with powerful reporting capabilities. The chart of accounts is table driven, allowing accounts to grow and change as needed.

The Financial Edge, from Blackbaud, Inc. (www.blackbaud.com), offers some of the most sophisticated, leading-edge accounting technology available. It is best used in very large nonprofits, such as those with an annual operating budget of more than $15 million and a large staff.

This system offers a myriad of functions. Schools and national organizations that seek true integration with the popular fundraising and donation software Raiser's Edge (also a Blackbaud product) would benefit from this system. Its tight integration allows for the drill-down of information from Financial Edge's general ledger to the actual source in the Raiser's Edge.

Financial Edge provides a number of business evaluation tools to analyze data, projects, and grants, with each tool sold in separate and complete modules. The analytical module, called Information Edge, allows a number of analyses and reports to be completed. A separate grant module is provided (rather than a segment of the chart of accounts), with a media tab that allows users to attach grant-award documents and correspondence.

Like any sophisticated system, Financial Edge is costly and requires more setup time and staff training than simpler systems. Its functionality is robust, however, and worth the extra investment and effort. …

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