When to Choose a Fund Accounting Solution
Due to the nature of their work, churches are held to a high standard of accountability by internal and external stakeholders. Without a financial solution designed to comply with non-profit accounting standards, it can be challenging to demonstrate transparency and fiscal responsibility to constituents.
While commercial accounting software can be configured to meet basic financial tracking and reporting needs of organizations of faith, church staff will find it difficult to effectively manage restricted funds and maintain GAAP compliance, especially as accounting needs become more complex. In fact, church staff will have to spend valuable time on workarounds for processes that should be intuitively streamlined within their financial system.
But it doesn’t have to be this way!
With a fund accounting solution, your organization can save valuable time and resources while meeting nonprofit accounting standards and showing stakeholders that your organization is dedicated to ethical accounting practices. The result? More staff time to focus on faith and mission growth!
5 reasons to choose fund accounting software
#1: Track data through a flexible chart of accounts
Organizations of faith are often juggling multiple projects on various timelines. Revenue sources can be numerous — grants, weekly offerings, memorials, contributions — and when supporters restrict contributions, these funds must be tracked and reported separately in order to demonstrate that they were spent in accordance with donor intent. A flexible chart of accounts allows you to effectively track and report this information to supporters, while also allowing for better visibility into program efficacy and organizational fiscal health.
#2: Comply with reporting standards
In order to maintain non-profit status, churches are required to comply with the generally accepted accounting principles (GAAP) set forth by the Financial Accounting Standards Board (FASB). These principles include the following key requirements:
- Organizations must track and report net assets based on donor restrictions (i.e., net assets without donor restrictions and net assets with donor restrictions)
- Pledged funds must be recorded as income when promised
- Expenses must be reported by function (programs, management and general, and fundraising)
If you’re finding it increasingly difficult to create reports that accurately meet these requirements, then it’s time to reexamine your financial system. Fund accounting software is designed specifically to meet these requirements so church staff can rest assured that they are maintaining compliance.
“We wanted something that was tailored to a nonprofit organization. With our size, Financial Edge NXT gives us the functionality we need and allows us to operate at our full potential.”—Greg Seay, Controller, Fellowship Bible Church of Northwest Arkansas
#3: Manage multiple grants
It can be complicated to track revenue and expenses from various sources as your church grows. Failure to show that contributions were designated according to donor intent can cause your church to lose face and future funding. With the right software, churches can simplify this process by creating funds and assigning accounts in the general ledger.
#4: Increase accountability with internal controls
Multiple individuals might be required to have access to your church’s accounting information. However, they don’t all need the same level of access. A robust fund accounting solution gives system administrators the ability to set user-specific access restrictions, so users can get the information they need when they need it without compromising data security.
“It is not enough for us to say to our donors that we are being good stewards of their money. You have to show them in financials, in the 990, in the audit. Financial Edge NXT is what allows us to stay transparent, ethical, and compliant.”— Rebecca David, Finance Director, Catholic Charities of Oklahoma City
#5: Securely access your data and applications
When considering a cloud fund accounting solution provider, the best choice is a vendor who understands the technology and financial management needs of churches in a way that adds value to your organization. Your solution provider should also have a proven history of delivering reliable, purpose built solutions that provide organizations with:
- Secure access to data anytime, anywhere
- Fast, flexible reporting
- Nimble budget analysis
- Streamlined program management
- Strong internal controls
Cloud-based fund accounting software with powerful reporting capabilities built to meet the complex financial management and reporting needs of churches can help your organization maintain compliance with nonprofit accounting standards and demonstrate fiscal transparency to stakeholders.
The result? More staff time available to expand your organization’s outreach and grow your mission.