Many nonprofit finance teams are facing growing complexity while operating with limited staff and resources. Nonprofit finance teams today have more funds and programs to manage, more reporting requests and requirements, and a greater need for visibility and transparency than ever before. In a word, it is stressful. That’s why it could be time to consider a modern fund accounting software solution.
Having the right fund accounting software in place is important because it helps your organization appeal to donors who want to understand where their money is going and how it’s helping to make a positive impact. Without the advantages that modern fund accounting software solutions provide, a nonprofit finance team can get bogged down searching for data in spreadsheets or an outdated accounting system and make it difficult to tell a comprehensive story about mission impact.
This article explores six signs it may be time to change your nonprofit finance team’s fund accounting processes. You’ll find additional details, examples, templates, and tools when you read our e-book about how to choose the right fund accounting software for your organization.
1. Reporting is a struggle that takes too much time.
If your organization lacks real-time visibility into your accounting for funds and grants, allocations, and more, it’s difficult to make the best decisions to move your mission forward. Plus, by the time your team pulls the right information it needs to complete a report, the backward-looking analysis has gone stale.
When asked about their organization’s biggest internal challenges for 2023, nonprofit finance leaders ranked manual, time-consuming reporting processes at the top of the list. Many nonprofits deal with manual accounting processes, spending hours and even days manipulating data in spreadsheets to create financial reports.
Using modern fund accounting software, nonprofit leaders get access to timely, accurate data with real-time reporting through role-based dashboards. This empowers them to keep an eye on critical areas of the organization, speeds time-to-insights, and drives better decision making.
2. Your nonprofit relies too heavily on inefficient, error-prone manual processes.
Entering data into multiple systems or spreadsheets that don’t talk to each other is risky. If your nonprofit relies on systems that aren’t automated or integrated, it can take extra time to export data from one system and then manually import it into another. Additionally, manual data entry can introduce dreaded typographical and other painful errors. Data entry makes poor use of employee time and talent and often forces nonprofits to hire more people than necessary to complete mundane tasks—time that could be better spent on strategic analysis.
Nonprofits with modern fund accounting software solutions do not have to spend time wrestling with manual processes. Modern fund accounting software delivers functionality to help nonprofits account for financial complexity and seamlessly integrates with other best-in-class applications.
3. Your team depends on unwieldy spreadsheets to analyze performance, sometimes causing reporting errors or version control problems.
Without the right fund accounting software, many nonprofits find it difficult to sift through unwieldy spreadsheets with thousands of unique account numbers to decide which account to use, fix errors during close, or create reports. Chances are that your bloated spreadsheets are making it difficult and time consuming to get the information your nonprofit needs to thrive. An Intelligent General Ledger (GL)™ pairs AI and automation to simplify your chart of accounts and streamline accounting processes.
CFO Paige Oldham of Health Solutions recognized it was time to ditch their tedious spreadsheet-based process:
“We have over 60 different programs, some of which are specifically grant-funded and give us money tied to certain operational goals. Now that we have FTE data in Sage Intacct, it’s easy to do expense allocations and pull in encounter details from our EHR system. At any time, we can say, ‘this employee in the adult services department produced 60 units valued at X dollars this month’ and get a handle on where we’ll be by the end of the year.”
~ Paige Oldham, CFO, Health Solutions
This type of unit cost reporting is critical because it’s how the state determines the center’s rates for the coming year, which makes up around 90% of their funding. Previously, the spreadsheet-based process was so tedious that the team only had time to produce the report annually.
4. The number of your locations, programs, grants, or projects has grown rapidly and, as a result, you’re considering adding additional accounting headcount.
Nonprofit organizations place high demands on their finance professionals. But no matter what you do, sometimes it feels like you just can’t get ahead of all the reporting requests and compliance requirements. When the complexity of funding and accounting streams is increasing and you’re feeling constrained by a lack of time and resources, it’s the perfect recipe for stress and strain. Will more headcount help get through all the work?
As your nonprofit grows in size and mission, you need flexible fund accounting software to manage financial complexity and organizational structures. Fortunately, finance teams that take advantage of modern fund accounting solutions can achieve greater visibility with real-time data across multiple entities, dispersed teams, and multiple locations—even with limited staff.
5. Backward-looking reports no longer cut it for making decisions. Management and the board need real-time visibility, as do external third parties.
Are you spending too much time tracking down financial and operational data like square footage, available meals, or other granular measures that matter to your nonprofit? Which programs deserve additional funding next year, based on outcomes? What expenses need to be slashed?
When your executives, board, and trustees try to answer these questions, they should do so with a complete view of up-to-date financial information. They shouldn’t have to rely on data from last year or last quarter.
Fortunately, modern fund accounting software provides real-time reporting and centralizes financial and outcome data within a dimensional database, making it easy to slice and dice data as desired. Program managers, executives, and board members get a quick view of relevant performance metrics on their role-based dashboards. They also have the ability to drill down for granular details.
6. You need to perform consolidations.
Many nonprofits operate multiple entities, locations, and programs and work in many countries. Complex operations require a higher order of functionality not usually met by outdated systems or spreadsheets.
Modern fund accounting software can help your finance team manage funds more proactively with continuous multi-entity consolidations and multi-currency accounting capabilities streamlining reporting and providing a real-time, single source of financial truth across the entire organization.
Adopting a new fund accounting solution can be a big move for any organization. It helps to start with a solid plan and process for your evaluation. Sage created the e-book, A 5 Step Plan for Selecting the Right Fund Accounting Software for Your Nonprofit, to help organizations consider their options, evaluate and compare solutions, and build the best possible business case. Download the e-book for practical tips and tools to help assemble your business case.