What to Consider in Buying Accounting Software for Non-Profit Organizations?

When searching the market for accounting software, the options can be overwhelming. Typically, companies who categorize themselves as for profit are the ones looking for software. However, we often forget there is a sector of the business world for non-profit organizations. While both are businesses, a non-profit operates differently than a for profit, especially when it comes to financial recording.

Some of the differences between the two business structures include cost allocations and the reporting of expenses. Also, tax reporting will be different due to the legality of each business structure. An example would be within a non-profit structure, services or products are unable to be sold for a profit. That means within standard accounting software, the applicability to a non-profit is minimal.

Non-profit organizations must categorize expenses across management, fundraising, and operation areas. Review the accounting software because it should give you the ability to expense items throughout those categories. An example would be you may need to know that within your office, a certainly percentage is used for administrative tasks.

As with any business, knowing the allocation of these funds gives you the tools necessary to project costs. If you organize a fundraiser, your accounting system needs to generate how much the fundraiser cost. When it comes do the details, there are several standards at your disposal on how to apply costs, albeit direct or indirect. This would be a discussion for your financial advisor or accountant to find what fits your business best.

Another difference to keep in mind is revenue, as it will different between for profit and non-profit. Every country has its own unique accounting standards that define revenue. This bridges into categories of restricted and unrestricted funds, donated good, and in-kind contributions.

Lastly, a non-profit will be required to generate special reports. Some of those reports include a statement of financial position. This generates information on assets that may be utilized for furthering the operation. What we commonly with for profit organizations is the balance sheet, which lists many different assets. Also, a non-profit will track excess of revenues over expenditures while a for profit will track net income.

Other items to consider include tax forms that need to be generated, the hiring of employees, and any work that may need to be contracted out. A non-profit is certainly a viable way of starting a business, but ensure you have a financial professional that can help with the financial aspect of things until you become acclimated. Inadequate financial recordings are a sure way to bring unwanted attention to your business and stress to your staff. Being prepared will best suite you and your non-profit for the future.