Do you know that accounting software isn’t exclusively designed for profit-making incorporation? It seems some people don’t realize how much accounting software can also help scale activities of the nonprofit organizations.
Here are some ways that accounting software help NGOs:
Tracking efficiency
One of the essential aspects of accounting software for nonprofits is tracking expenses and meeting compliance standards which commercial accounting systems fail to do.
Many nonprofits have multiple projects they’re working on at any given time, making it difficult to comprehend how well each one is doing.
This can be done by using a system that tracks expenses and income for each project. In such a system, your finances will be more transparent and easy to manage.
Another way to keep track of your finances is by dividing your organization into departments with separate budgets.
For example, if you’re running a shelter for abused animals, one department may be responsible for food costs while another oversees medical care. This allows you to easily see how well each department meets its goals without having to look through all the other data available in your accounting software (which could take hours).
Managing grants and projects
Most NGOs need to manage a large number of grants and projects at any given time. Grant money can come from various sources, but generally, it is awarded by the government or other organizations for a specific purpose.
Projects are activities that an NGO undertakes as part of its mission. Nonprofits are held to a high standard of accountability and transparency and are required to comply with industry accounting and reporting standards to maintain nonprofit status, say experts at Blackbaud.
Managing compliance
Complying with government regulations and laws is not just a matter of fulfilling tax obligations—it’s also about maintaining the integrity of your nonprofit. In the US, NGOs must adhere to the IRS’s stringent rules to retain their status as tax-exempt.
These rules include:
- Paying income taxes on any profit from investments (like interest)
- Disclosing all financial transactions on Form 990
- Keeping accurate books and records
Budgeting and forecasting
When you work in an NGO, the budget is your lifeline. It shows you how much you must spend on running costs, salaries and other administrative services.
A reasonable budget will also tell you if your organization is achieving its goals and whether these are realistic or not. This can help you make any necessary changes before it’s too late!
To create a proper budget for your NGO:
- Make sure all staff members know their respective responsibilities
- Ensure that all expenditure is accounted for in detail
- Check that there isn’t too much variation from the previous year’s figures – if there is, make necessary adjustments.
Evaluating performance
Performance evaluation is critical to any organization’s success, and nonprofits are no exception. To evaluate performance, you need to determine the specific objectives you have set for your organization. These include:
Measuring outputs (end products) and outcomes (effect on people or the environment).
Accomplishing goals within a time frame and at a minimal cost.
Conclusion
As crucial as accounting is to businesses, so it is to NGOs. Overall, it’s clear that a well-equipped accounting system like the one offered by Blackbaud can help NGOs by meeting their program objectives through a well-developed plan.
It’s a valuable tool for a good accountant who knows how to use them effectively.
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