Managing the finances of a nonprofit organization involves more than just balancing the books. Every dollar is tied to a mission, whether it’s a grant to fund a specific program or donations to keep daily operations running. To keep it all straight, nonprofits rely on fund accounting software designed specifically to handle the unique requirements of their sector. But with so many options out there, how do you know which one is right for your organization?

In this post, we’ll explore what makes fund accounting software different from regular accounting software, review the top choices on the market, and help you choose the best one for your nonprofit’s needs.

What Is Fund Accounting Software?

At its core, fund accounting software is a specialized tool designed specifically to help nonprofit organizations manage multiple funds—like restricted and unrestricted funds—effectively. Unlike traditional for-profit businesses that focus on profits and losses, nonprofits focus on accountability. Every dollar has a purpose, and you need to make sure it’s spent in line with donor intentions, government regulations, and organizational goals.

Fund accounting software helps nonprofits by tracking different types of funds, like donations, grants, and endowments, all of which can have specific restrictions. These systems also help organizations comply with the Financial Accounting Standards Board (FASB) guidelines, ensuring that financial reporting is accurate and transparent.

When you’re working in a nonprofit, fund accounting software doesn’t just save time—it becomes a vital part of daily operations, helping you juggle budgets, grant deadlines, and compliance. And let’s not forget those last-minute donor report requests!

How Is Fund Accounting Different From Regular Accounting?

Regular accounting focuses on tracking profits and expenses, but fund accounting serves a different role. It’s not just about tracking revenue. It’s about making sure that money is used for its intended purpose. Whether you’re managing restricted funds from a specific donor or unrestricted funds that can be used more freely, every dollar must be accounted for. Nonprofit organizations often face unique challenges when it comes to tracking and reporting on these funds.

Where a typical business might focus on maximizing profit, nonprofits focus on meeting their mission. This means fund accounting must separate income streams and report on how each is used. For example, if your nonprofit receives a grant to build housing, that money can’t be used for general operating expenses. Fund accounting software makes it so that all those financial activities stay on track and within the guidelines.

What Kind of Organizations Use Fund Accounting?

Fund accounting software is widely used across nonprofit organizations, charitable organizations, and state and local governments. Any organization that manages donations, grants, or other forms of restricted funds will benefit from using fund accounting software. Here’s a more detailed list:

• Nonprofit organizations like charities, foundations, and social services organizations use fund accounting to manage donations and grants.
• Religious organizations also need to track tithes and donations.
• Government entities including local governments and state-run programs, use fund accounting for projects funded by grants and taxes.
• Educational institutions often rely on fund accounting to track endowments and donor contributions.

In short, any organization that deals with multiple streams of revenue—each with its own restrictions—should consider using fund accounting software.

What Are the Most Commonly Used Fund Accounting Software?

Choosing the right fund accounting software depends on your organization’s size, complexity, and financial needs. While there are several options on the market, each comes with its strengths and weaknesses. Let’s break down the most commonly used software and examine where they fall short in comparison to Sage Intacct.

1. Sage Intacct

Via Sage.com

Sage Intacct is the gold standard for nonprofits looking for comprehensive fund accounting solutions. Designed specifically for managing nonprofit finances, it shines with built-in grant management features, advanced financial reporting, and the ability to handle both restricted and unrestricted funds. Sage Intacct also integrates seamlessly with donor management systems, creating a holistic financial management ecosystem.

Its cloud-based nature allows nonprofits to securely access data from anywhere, offering flexibility and ease of use for organizations of all sizes. Sage Intacct is our top choice for nonprofits looking for a reliable and powerful financial management solution.

2. Xero

Via Xero.com

Xero is often recommended for smaller nonprofits or those just beginning their journey into fund accounting. Its cloud-based platform and user-friendly interface make it accessible to organizations with limited resources or accounting expertise. While Xero is excellent for general accounting tasks, it quickly reveals its limitations when nonprofits need more advanced features like managing restricted funds or complex nonprofit financial reporting.

3. NetSuite

Via Netsuite.com

NetSuite is known for its powerful cloud-based solutions and scalability, making it appealing for larger nonprofits and government agencies. It offers advanced features for managing budgets, restricted funds, and grants, and can handle the complexity that comes with operating across multiple locations or managing various programs.

However, its complexity can be both a strength and a weakness. NetSuite excels for larger organizations with complex accounting and reporting needs, but its steep learning curve and higher cost make it less suitable for smaller nonprofits or those with simpler operations.

4. QuickBooks

Via Quickbooks.com

QuickBooks is a familiar name in the nonprofit space, particularly for smaller organizations. Known for its affordability and ease of use, it’s often the starting point for many nonprofits when it comes to fund accounting. However, as organizations grow or encounter more complex financial management requirements, QuickBooks can start to feel limited.

For nonprofits with simple accounting needs and limited budgets, QuickBooks can be a helpful and affordable solution. However, as your organization grows or requires more advanced financial reporting and fund tracking, you’ll likely need to upgrade to a more robust system.

5. MIP Fund Accounting

Via MIP.com

MIP Fund Accounting is a strong option for nonprofits that need to manage complex funding structures. It excels in handling multiple revenue streams, such as grants, and provides a high degree of customization, allowing organizations to tailor financial reports to their needs. While its interface is not as user-friendly as Sage Intacct’s, MIP still offers solid cloud capabilities, though it lacks the advanced real-time collaboration tools found in other platforms.

6. Blackbaud Financial Edge NXT

Via Blackbaud.com

Designed for larger nonprofit organizations, Blackbaud Financial Edge NXT offers powerful tools for grant tracking, budget management, and financial reporting. Its features are robust, making it an excellent choice for nonprofits with sophisticated financial management needs. That said, the system’s complexity can be overwhelming for smaller organizations, and its pricing may be a barrier for those with limited resources. Additionally, Blackbaud’s integration with donor management platforms isn’t as seamless as other platforms.

7. IconCMO Fund Accounting

Via IconCMO.com

IconCMO Fund Accounting is a budget-friendly option for smaller nonprofits. It provides essential fund accounting features, such as tracking restricted and unrestricted funds, and is easy to use. While it’s a great entry-level solution, IconCMO lacks advanced features like grant management and detailed financial reporting.

As nonprofits grow or require more complex financial tools, upgrading to a more comprehensive system, such as Sage Intacct or Blackbaud, may become necessary.

Checklist: What Nonprofits Should Look for in Fund Accounting Software

Now that we’ve looked at what fund accounting software is and some popular options that are out there, let’s dive into what features and considerations nonprofits should keep in mind when choosing a fund accounting solution. You can use this checklist as a guide to help you make an informed decision that best fits your organization’s needs.

1. Fund Tracking Capabilities

• Ability to track restricted and unrestricted funds.
• Separation of funds for specific projects, programs, or grants.
• Customizable reporting for net assets and different funding streams.

2. Grant Management Tools

• Built-in tools for tracking grant applications, approvals, and allocations.
• Compliance with grantor reporting requirements.
• Monitoring of grant deadlines and funding usage.

3. Financial Reporting

• Generates detailed financial statements in compliance with FASB standards.
• Customizable financial reports that provide insights into program funding.
• Provide documents for financial audits
• Real-time access to financial data and cloud-based reporting capabilities.

4. Integration with Other Systems

• Seamless integration with donor management systems and CRM platforms.
• Compatibility with payroll and HR systems.
• Ability to sync with investment accounting tools if applicable.

5. Scalability

• Supports organizational growth and increased complexity over time.
• Flexible to handle growing numbers of programs, grants, and donors.
• Suitable for both smaller nonprofits and larger, complex organizations.

6. User-Friendly Interface

• Intuitive and easy to navigate for staff and volunteers with varying skill levels.
• Minimal learning curve to get teams up and running quickly.

7. Cost-Effectiveness

• Aligns with your nonprofit’s budget without sacrificing essential features.
• Offers different pricing tiers for not for profit organizations of various sizes.

8. Compliance and Security

• Provides tools for ensuring compliance with IRS and FASB regulations.
• Offers strong data protection and secure access to financial information.

9. Support and Training

• Accessible customer support with nonprofit-specific expertise.
• Comprehensive training materials and resources for onboarding new users.

Using this checklist will help make sure your chosen accounting system meets the financial management needs of your nonprofit, while also preparing you for future growth and complexity.r nonprofit, while also preparing you for future growth and complexity.

What Is the Best Fund Accounting Software?

When selecting fund accounting software, Sage Intacct for charities stands out by catering specifically to nonprofit organizations. Unlike general accounting platforms like Xero, NetSuite, and QuickBooks, Sage Intacct addresses the unique challenges nonprofits face, such as managing restricted and unrestricted funds and adhering to nonprofit accounting best practices and standards. Below are our reasons for selecting Sage Intacct as our top software for nonprofits:

Built for Nonprofits

While other software offers basic fund tracking, Sage Intacct is designed with nonprofit needs in mind. It provides advanced features for handling multiple funding sources, enabling organizations to accurately allocate and monitor funds across various programs and projects.

Grant Management

Sage Intacct includes built-in grant management tools, allowing nonprofits to track grants from inception to completion. This feature makes compliance with grant requirements more manageable and eases the reporting process. In contrast, platforms like QuickBooks lack integrated grant management, often requiring manual workarounds.

Advanced Reporting

Financial transparency is crucial for nonprofits. Sage Intacct offers detailed financial reporting that complies with the Financial Accounting Standards Board (FASB) guidelines. Its reports provide insights into restricted funds, general funds, and overall financial activities. Other software may offer basic reporting but often falls short in meeting nonprofit-specific reporting standards.

Cloud-Based Access

While many platforms offer cloud capabilities, Sage Intacct combines cloud access with nonprofit-centric tools. This allows teams to securely access financial data from anywhere, facilitating collaboration and real-time decision-making. Platforms like NetSuite may be too complex or costly for smaller nonprofits, whereas Sage Intacct offers scalability suitable for organizations of varying sizes.

Integration with Donor Management

Sage Intacct seamlessly integrates with donor management systems, aligning financial records with donor contributions. This integration reduces errors and enhances the tracking of donations and restricted funds. Other platforms might require additional integrations or lack this level of synchronization.

Sage Intacct distinguishes itself through its nonprofit-specific focus and comprehensive features that other platforms lack. For nonprofits seeking more than basic accounting, Sage Intacct provides the specialized tools needed to manage complex finances effectively.

Conclusion on Fund Accounting Software

Choosing the right fund accounting software is critical for the success of any nonprofit organization. While platforms like Xero, NetSuite, and QuickBooks may offer useful features, they often lack the nonprofit-specific focus required to effectively manage multiple funding sources, restricted and unrestricted funds, and grant compliance.

Sage Intacct stands out because it is purpose-built for nonprofits, offering advanced grant management, detailed financial reporting, cloud-based accessibility, and seamless integration with donor management systems. Whether your organization is small and growing or managing multiple programs, Sage Intacct offers the flexibility and depth needed to stay on top of your financial activities. Learn more about Sage Intacct here.

Key Takeaways

• Sage Intacct is designed specifically for nonprofits, addressing unique challenges like restricted funds and compliance with nonprofit financial standards.
• Xero is a simple, user-friendly option for smaller nonprofits, but it lacks advanced nonprofit-specific features.
• NetSuite is highly scalable for larger organizations but may be too complex or expensive for smaller nonprofits.
• QuickBooks is affordable and accessible for small nonprofits but may require an upgrade as organizations grow or financial needs become more complex.
• Sage Intacct provides comprehensive grant management, advanced reporting, and cloud-based access, making it the best choice for nonprofits of all sizes.

Frequently Asked Questions