Why the Best Accounting Software for Charities Must Support Fund Accounting

Managing the funds of a nonprofit or charity is not like managing a company’s payroll. Special duties of charities are to follow donations, keep up with the grant regulations, and communicate the expenditure of the funds transparently. That is why, when selecting the best accounting software for charities, it is not enough to select the app with cool graphics, as the mission must be to be safe.

Here we consider why fund accounting is important, what capabilities you should have, and how the appropriate technology can keep charities on schedule, organized, and prepared to answer related questions by donors.

The Unique Needs of Charitable Organizations

Every dollar entering a charity has a definite purpose, which is education programs, healthcare outreach, disaster relief, or any other. That implies that the money must be monitored in a manner that everyone, including the IRS, the board, and ordinary fans, is aware of where the money goes.

The best accounting software for charities must address this complexity. Nonprofits require resources that divide money into restricted and unrestricted, develop comprehensive reports to stakeholders, and maintain the auditors and the donors updated with real-time views.

What Is Fund Accounting and Why Does It Matter?

Fund accounting is an advanced manner of handling money by tagging each dollar with its purpose. You will end up with distinct buckets not only based on cash sources but on the basis of what cash is meant to be used on- the creation of a dollar based on why, as opposed to where.

Such an arrangement is essential to nonprofits since it makes them legally and ethically compliant. As an example, a grant that is only supposed to be used in environmental projects cannot be used to pay the salaries of the administrators. Fund accounting makes clear demarcations among those priorities.

The modern nonprofit accounting software has the structure built in. It avoids mismanagement, assists in IRS Form 990, and increases internal accountability.

Core Features in the Best Accounting Software for Charities

Fund & Grant Segmentation

Your software should allow you to create, track, and report on several funds simultaneously. All donations of general purpose, disaster relief, or educational purposes ought to reside in their section. Good segmentation helps in the flexibility of financial reporting and ensures that you are in line with donor and legal requirements.

Budget Controls & Real-Time Allocation

Budget management and a real-time image of the amount of money available help avoid going overboard. A marked dashboard will enable you to compare money, set priorities, and make responsible plans.

As a charity, you need software that will track where your cash is being spent without having to fiddle around on spreadsheets, and more importantly, not just because your budget is constantly evolving. The best accounting software for charities does just that, alerting managers when expenditure is approaching limits to ensure that nothing falls through the cracks.

Built-In Approval Workflows & Audit Trails

It is necessary to be transparent on the inside and outside of a building when it comes to running any organization, as well as a nonprofit organization. That is why such systems have automated approval flows so that the head of the department can review and approve transactions before they are processed. 

Audit trails ensure that every dollar is accountable, and this is a condition of grant compliance and ethical governance.

Why Generic Accounting Tools Fall Short

Accounting programs meant to be used by a general business, the type that small businesses use, do not have the nonprofit logic. Sure, they could enter income and expenses, but most will not:

• Support restricted vs. unrestricted funds
• Offer built-in fund-based reporting
• Integrate with donor management systems
• Provide easy compliance tools for the IRS Form 990 or the FASB standards

Manual workarounds, data silos, and compliance risk are what you get when you rely on a generic tool. It may cost you less on the surface, but it will cost you money and time in the long term.

Benefits of Using Fund Accounting Software

A movement to real nonprofit accounting software resolves these issues and allows new heights of operational performance.

Improved Donor Trust

Donors are keen to know the specific use of their money, and this is where the fund level is concerned. Once they become able to see that, they will be more likely to give again. These reports are clear and will help in enhancing relationships that also result in improved fundraising outcomes every year.

Easier Grant Compliance

Most grant makers require intricate reports and audits. A fund-ready system also allows you to tag grant funds separately and produce reports by agency. That saves time, reduces errors, and increases your future funding prospects.

Board and Executive Insights

Leadership requires current figures who can make intelligent decisions. A fund-ready solution can provide real-time dashboards with cash flow, fund balances, and spending trends. 

The best accounting software for charities offers such insights in real-time without requiring executive teams to wait until the end of the month.

Choose the Right Solution

Modern nonprofits should have contemporary solutions, and this implies the appropriate selection of the software. The ideal solution will be based on the requirements of your nonprofit, compliance objectives, and the scale of your financial transactions.

When you have grown weary of working with generic tools and need something designed to meet the needs of nonprofits workflows and funds, consider Tangicloud’s software for nonprofit accounting. You will receive an internet-hosted, secure system that incorporates fund accounting capabilities, configurable reports, audit trails, and grant tracking. It is ideal for growing nonprofits that cannot afford financial mistakes.

Conclusion

Charities need fund accounting: it is not a nice-to-have. No matter what you handle, grants, donor campaigns, or general operations, the highest financial objectives are transparency and accountability. To do that, you require the best accounting software for charities that accommodates these requirements as an inbuilt feature, not by add-ons and workarounds.

Are you willing to improve the financial management of your nonprofit? Discover the Tangicloud charity platform and make every transaction transparent, compliant, and confident.