Most nonprofits would agree that finding the right accounting software is crucial, yet can be an overwhelming process.
In this comparative analysis, we promise to explore the top accounting platforms tailored to nonprofit needs, unveiling the software capabilities across critical functional areas.
You will gain insight into leading solutions—including Aplos, QuickBooks, and open source options—to inform your decision making when determining the best fit for your organization's financial management.
Introduction to Nonprofit Accounting Software
Nonprofit organizations have unique financial management needs compared to for-profit businesses. They rely heavily on donations and grants with restrictions on how funds can be used. Tracking these funding sources and expenses is critical for transparency and meeting legal reporting requirements. Using an accounting system designed for nonprofits can optimize financial oversight.
Key features of nonprofit accounting software include:
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Customized chart of accounts to track restricted funds and programs
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Grant management tools
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Robust reporting for strategic decision-making
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Integration with CRM donor databases
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Automation to simplify processes and reduce human error
Switching to accounting software purpose-built for nonprofits can increase efficiency. Staff spend less time on manual tasks like cash flow analysis, report generation, and reconciliation. The software also reduces the learning curve for new employees by standardizing financial processes.
Overall, nonprofit accounting systems facilitate improved stewardship of donor funds. Organizations gain enhanced visibility into the true costs of their programs and operations. This aids strategic planning and prioritization based on accurate finance data. As fundraising becomes more competitive, nonprofits need every advantage in demonstrating responsible fiscal management.
What is the best accounting method for nonprofit organizations?
Nonprofit organizations have a few options when it comes to accounting methods. The two most common are cash basis accounting and accrual basis accounting.
Smaller nonprofits often use cash basis accounting because it is simpler to manage. With this method, income and expenses are recorded when cash is actually received or paid out. However, cash basis accounting does not comply with gaap-generally-accepted-accounting-principles/">Generally Accepted Accounting Principles (GAAP).
As nonprofits grow larger, they typically transition to accrual basis accounting. With accrual accounting, revenue and expenses are recorded when transactions occur instead of when payments are made. Though more complex, accrual accounting provides a more accurate picture of a nonprofit's financial position and activities over time. It also complies with GAAP standards, which is essential for larger nonprofits that need audited financial statements.
In terms of specific accounting standards for nonprofits, many follow the Financial Accounting Standards Board (FASB) guidelines. Some larger nonprofits also adhere to Governmental Accounting Standards Board (GASB) principles. Choosing the right accounting method and standards is a strategic decision that affects financial reporting, compliance, donations, and more. Most experts recommend accrual basis accounting for long-term sustainability, especially as a nonprofit expands programs and funding sources.
How do you analyze nonprofit financials?
Analyzing a nonprofit's financial statements involves assessing key metrics and ratios to evaluate the organization's financial health and sustainability.
When reviewing a nonprofit balance sheet, it's important to analyze the relationship between assets, liabilities, and net assets. Total assets should equal total liabilities plus net assets, reflecting that the nonprofit's assets are financed through debt, liabilities owed, and net assets or equity.
A few key metrics to analyze further:
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Current ratio - Measure of short-term liquidity calculated by current assets divided by current liabilities. Aim for a ratio of at least 1.0 or higher.
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Debt ratio - Indicates extent of leverage by comparing liabilities to total assets. Lower ratios are preferable.
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Net asset composition - Review breakdown of restricted, temporarily restricted and unrestricted net asset categories over time. Growth in unrestricted net assets gives more financial flexibility.
When assessing the statement of activities, analyze key performance indicators such as:
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Revenue growth - Compare total revenue year-over-year and by category/source. Growing diversified revenues improves sustainability.
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Expense ratio - Program expenses divided by total expenses indicates amount spent directly on mission-focused efforts. 80-90%+ is ideal.
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Change in net assets - Provides insight on operating surpluses or deficits. Can compare to peer nonprofits.
Using ratios and metrics to regularly monitor financial statements helps nonprofits benchmark their financial health, set improvement goals, and demonstrate accountability to stakeholders. Tracking trends over fiscal years gives the clearest insight.
What edition of QuickBooks is most advantageous for a nonprofit organization?
QuickBooks Enterprise Nonprofit edition provides nonprofit organizations with robust accounting and financial management tools tailored to their unique needs. Here are some of the key advantages of using the Enterprise Nonprofit edition:
Donation and Grant Tracking
This edition enables nonprofits to easily track different types of contributions from various funding sources. You can categorize donations and grants, attach notes, and run reports to understand your income sources.
Budgeting and Planning
With the nonprofit edition, you can set budgets by program or grant and compare actual spending to budgets. This helps nonprofits plan their funding allocations more effectively.
Donor and Constituent Management
The edition comes with a built-in donor database that securely stores constituent information like donation history, contact info, notes etc. This improves donor stewardship.
Reporting
Robust reporting capabilities in the software allow nonprofits to create financial statements, donor reports, grant reports, and other documentation required for compliance and decision making.
In summary, QuickBooks Enterprise Nonprofit provides end-to-end accounting and financial management for nonprofit use cases out of the box, with no need for additional customization. This saves nonprofits time and money compared to configuring other software for their unique needs.
What is the best accounting software for small charity?
Finding the right accounting software is crucial for nonprofits to effectively manage donations, expenses, and reporting. When evaluating options, small charities should consider ease of use, automation capabilities, reporting, and managing restricted funds.
Based on these criteria, Aplos stands out as the best overall choice. It provides an intuitive interface tailored to nonprofits that simplifies bookkeeping. Users praise its ability to automatically track different types of donations and link them to specific programs or fundraising campaigns. This streamlines reporting on how funds are allocated and spent.
Aplos also includes over 100 customizable reports focused on nonprofits’ needs. These provide clear insight into cash flow, allocations, and comparisons over time. Leadership can easily report to stakeholders how donations positively impact their organization.
For small charities, a final advantage is Aplos’ transparent and affordable pricing. It offers core accounting features free for small nonprofits, removing barriers many face when adopting new technology.
While Aplos is ideal for most, QuickBooks best aids managing fluctuating cash flow. Its forecasting tools help nonprofits predict income gaps and adapt accordingly.
Overall, lean nonprofits can leverage Aplos to simplify accounting operations. Its focus on automation and transparency provide the essential features smaller organizations need to manage funds responsibly. Evaluating options like QuickBooks can ensure specific needs around reporting or predictions are also met, maximizing stewardship.
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Assessing the Best Software for Nonprofits
We will analyze and compare the core accounting features across top nonprofit accounting platforms, including general ledger, billing and invoicing, budgeting tools, reporting, and more.
General Ledger Capabilities
Nonprofit accounting software needs robust general ledger functionality to record financial transactions and track funding sources.
QuickBooks, Aplos, and Open-Org provide nonprofits core ledger capabilities like:
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Multi-fund accounting: Properly record restricted, temporary, and unrestricted funds in separate ledgers.
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Customizable chart of accounts: Tailor account categories and tracking to your nonprofit's reporting needs.
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Transaction logging with audit trail: Capture detailed accounting entries, edits, approvals, etc.
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Automated journal entries: Schedule recurring transactions for payroll, amortization, pledges, etc.
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Revenue recognition by fund: Distinguish between earned and pledged revenue.
However, Aplos particularly stands out with its unlimited revenue sources and funds feature. This flexibility helps nonprofits track many diverse income streams in a consolidated financial record.
QuickBooks also offers advanced customization around ledger set up for nonprofits managing complex budgets and grants.
In-Depth Reporting and Analytics
Nonprofit executives need clear financial statements and easy data access to guide strategic decisions.
All three platforms provide real-time reporting on:
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Balance sheets
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Income and expense statements
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Cash flow
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Trial balance
QuickBooks and Aplos also include tailored nonprofit reports like statement of functional expenses.
However, Open-Org has the most flexibility for data visualization with custom charts and dashboards. Users can track key metrics across multiple programs, funds, or locations over custom date ranges.
The other two platforms focus more on canned reports for bookkeeping needs rather than ad-hoc analysis.
Budgeting and Forecasting Tools
Creating budgets in nonprofit accounting platforms ensures finances align to organizational goals. Cloud-based software can also use past spending patterns to predict future demand for grants and donations.
Aplos offers the most complete budgeting features including:
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Budget wizard for quick setup
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Live tracking of actual vs. budgeted amounts
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Flexible revision of budgets
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Cash flow forecasting based on historical trends
QuickBooks also facilitates nonprofit budgeting and links revenue/expenses to budget categories. But forecasting capabilities are not included natively.
Open-Org supports very simple budgeting only by customizing income/expense accounts. The tool lacks a dedicated module for more advanced nonprofit budget building or cash flow projections.
Ease of Use and Support
We evaluate how intuitive and easy to learn each nonprofit accounting system is, including factors like the interface, learning curve, and quality of support.
User Interface and Navigation
The user interface and navigation are key aspects that determine how easy nonprofit accounting software is to use on a daily basis.
Nonprofit teams need to access critical financial data and generate reports with ease. The ideal software prioritizes simplicity through features like:
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Clean, uncluttered screens with logical, consistent layouts
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Intuitive menus and navigation that make finding key functions effortless
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Flexible dashboards for real-time insights into financial status
Additionally, mobile access ensures staff can tap into data and approvals from anywhere.
While nonprofit accounting systems have complex capabilities under the hood, an intuitive user interface makes processes user-friendly for all skill levels.
Understanding the Learning Curve
How difficult is it for new or non-accounting users to catch on and use the software effectively?
The learning curve varies significantly between nonprofit accounting platforms. Excessively complex solutions present barriers with steep training requirements and ramp-up times.
Ideally, software offers built-in education resources like:
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Contextual help guides
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Interactive tutorials
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Self-paced courses
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Tip sheets
With quality learning content integrated every step of the way, users can master capabilities on their own time. Minimal hand-holding accelerates user autonomy.
Furthermore, superior nonprofit accounting systems mirror workflows users are already familiar with, reducing the need to learn new processes from scratch. The system should adapt to the nonprofit’s needs rather than the other way around.
Comprehensive Implementation and Support
Nonprofits need assurance that the vendor offers complete guidance before, during, and after onboarding accounting software.
Key elements of a supportive launch include:
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Dedicated training to align capabilities with financial workflows, configured uniquely for the organization. This establishes best practices tailored for long-term success.
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Ongoing access to experts who quickly respond to inquiries, diagnose issues, and provide advice to maximize value from the platform.
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Proactive guidance with check-ins at milestones as needs evolve over time.
With training, documentation, and customer service working together across implementation and beyond, nonprofits can adopt new technology with full confidence in their provider’s committment to their success.
Unveiling Aplos Software Capabilities
Aplos is a cloud-based nonprofit accounting software designed specifically to meet the needs of charitable organizations. With Aplos, nonprofits can easily track donations, manage budgets, process payroll, file 990 tax forms, and more.
Seamless Donation Management
One of Aplos's standout features is its seamless donation management system. The software connects directly with PayPal, Stripe and other payment gateways to instantly record online gifts. It can also automate the sending of emailed tax receipts to donors. These capabilities save nonprofits countless administrative hours around fundraising efforts.
Aplos also includes tools to track one-time and recurring donations. Users can log cash and check gifts, view lifetime contribution histories per donor, categorize donations for reporting, and more. For nonprofits that run multiple fundraising campaigns, these features are invaluable.
Robust Budgeting and Reporting
Creating realistic budgets and monitoring spending levels are vital for the health of any nonprofit. Aplos enables organizations to set both organization-wide or department-specific budgets. Users can run real-time reports to analyze performance-to-budget at any time.
The software also includes customizable reporting templates to showcase key financial metrics. Common nonprofit reports like profit and loss statements, balance sheets, statements of cash flows, and statement of functional expenses can all be generated with a click. For foundations and grantmaking groups, Aplos provides specialty reports to simplify grant tracking and scheduling.
Streamlined Payroll
Managing payroll in-house can be extremely taxing for nonprofits. Aplos integrates directly with leading payroll platforms like Gusto. Nonprofits can setup automatic payroll schedules, access tax forms, control permissions, and more without ever leaving Aplos.
For global nonprofits with team members stationed abroad, Aplos also supports international payroll. This enables seamless, localized salary and stipend payouts to international staff or volunteers.
Bottom Line
With powerful reporting, intuitive donation tracking, and built-in payroll management, Aplos gives nonprofits an all-in-one accounting and financial management solution. Organizations aiming to improve operational efficiency, transparency, and decision-making are wise to consider Aplos. The software delivers robust capabilities tailored specifically to serve the nonprofit sector.
QuickBooks for Nonprofits: An Exploration
QuickBooks offers two versions designed specifically for nonprofit organizations - QuickBooks Premier Nonprofit and QuickBooks Advanced Nonprofit. These provide tailored capabilities for nonprofit accounting, reporting, fundraising and compliance needs.
Customizing QuickBooks for Nonprofit Requirements
The Premier and Advanced products include several customizations for tracking donations, grants, pledges, dedicated funds and multiple programs or locations. Key features include:
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Customizable chart of accounts with segments for funds, campaigns, programs, etc.
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Nonprofit-specific reports like Statement of Financial Position and Statement of Activities
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Advanced grant management and tracking
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Fundraising tools for tracking pledges and donations
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Integrated payment processing for website donations
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Allocation of shared expenses across departments or locations
With the Advanced version, larger nonprofits can track up to 15 programs or locations within one company file. Both editions also integrate with popular nonprofit apps like DonorPerfect Fundraising Software.
Exploring Available Integrations with QuickBooks
QuickBooks offers an open API and growing app ecosystem that connects to hundreds of business solutions. Key integrations useful for nonprofits include:
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Payment processors like PayPal, Stripe and Square for easily accepting website or event donations
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CRM software like Salesforce, Zoho and Insightly to manage constituents and fundraising
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Email marketing tools like Mailchimp and Constant Contact to communicate with supporters
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Grant management apps like Submittable and SurveyMonkey Apply to streamline grant processes
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HR solutions like Paychex, Paylocity and ADP for managing remote employees or volunteers
With access to QuickBooks' open API, developers can also build custom integrations to specialized nonprofit systems related to volunteer management, program enrollment, etc. QuickBooks' cloud connectivity and growing integration marketplace help nonprofits customize a solution for their unique needs.
To summarize, QuickBooks Premier and Advanced Nonprofit editions provide end-to-end accounting, reporting and compliance tailored for donation-based organizations. Paired with related business apps, QuickBooks enables nonprofits to manage critical financial and constituent data from one central platform. With flexible growth scaling and opportunities for customization, it remains a top choice for nonprofit accounting software.
Navigating Free Accounting Software for Nonprofits
We explore free and open source nonprofit accounting systems like GnuCash and xTuple, analyzing the tradeoffs vs paid software.
GnuCash for Nonprofits: Capabilities and Limitations
GnuCash is a free, open-source accounting software designed for small businesses and individuals. As a non-profit focused platform, it has several useful capabilities:
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Double-entry accounting with robust reporting features like income statements, balance sheets, cashflow reports, and graphs.
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Multi-currency support.
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Customizable invoices, bills, employee reimbursements and payment receipts.
However, GnuCash also has some limitations when scaling, including:
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Lack of advanced custom reports compared to enterprise-level software. Filters and visualizations are basic.
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No built-in support for online payments or automated bank feeds. Needs 3rd party integration.
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Limited access controls and audit logging for sensitive financial data.
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Can be complex for untrained staff to learn independently without formal training.
So while GnuCash covers essential nonprofit accounting needs and is fully free, the reporting, security and usability may become constraints as the organization grows. Paying for software like QuickBooks or Aplos can address these issues.
xTuple: A Comprehensive Open Source Accounting Solution
xTuple is another open-source platform tailored specifically for accounting, ERP and CRM. Key features relevant for nonprofits include:
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End-to-end accounting with AR, AP, GL capabilities and robust reporting.
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Nonprofit-specific tools for fundraising, grants management and allocating donations.
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Built-in CRM and constituent relationship management (CRM).
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Access controls, field-level auditing and data security protections.
As an extensible framework, xTuple allows creating customized modules, screens and reports to suit unique needs. It can readily scale from small to large-sized nonprofits supporting complex workflows.
While the base software is open source and free, paid enterprise support subscriptions exist to access official training, priority customer support and software updates. This balances access for budgets of all sizes.
The comprehensive nature of xTuple makes it a full-fledged alternative to proprietary ERP/CRM systems from major vendors. The license freedom and TCO savings appeal greatly to nonprofits aiming to maximize program funding impacts. With proper implementation and change management, it can transform accounting efficiency.
Final Verdict: Top Picks for Nonprofit Accounting
Based on nonprofit size, budget, and functionality needs, here are some top software recommendations:
Aplos Software
Aplos is an excellent cloud-based software for small to mid-sized nonprofits. It's designed specifically for nonprofit accounting and financial management needs. Features include:
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Fund accounting
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Budgeting tools
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Donor management
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Reporting
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Integrations
It has customizable pricing starting at $99/month. Aplos is easy to use and affordable, making it a top pick for lean nonprofits.
QuickBooks for Nonprofits
The QuickBooks for Nonprofits edition has all the key features to manage nonprofit finances and operations smoothly. From fund accounting and grant tracking to budgeting and reporting - QuickBooks caters well to midsized nonprofits.
Pricing starts at $399/year for 1 user. While more costly than Aplos, QuickBooks offers robust accounting capabilities suited for larger nonprofits.
Open-Source Software
For nonprofits on a tight budget, open-source options like GnuCash or Wave Accounting provide free nonprofit accounting tools. However, they have steeper learning curves and may lack full-fledged functionality. Still, they can be great free options for smaller nonprofits.
Evaluate your nonprofit's size, accounting needs, and budget when shortlisting software options. While QuickBooks and Aplos are leading solutions, free open-source tools can also be suitable for lean nonprofits. Consider free trials to determine the best fit.
