Back to Blog

Commercial or Fund Accounting Software: Which is Best Suited for Your Nonprofit?

It’s the ultimate in convenience, or so it seems at first.  Buying commercial accounting software can seem like the perfect solution since it is used by so many for profit organizations.

However, numerous nonprofits find themselves in need of features that commercial software cannot offer.  Because nonprofits can have extremely specific accounting and reporting needs they oftentimes move beyond their ability to efficiently use commercial products.  When that happens, a move to a fund accounting software solution is necessary.

How do you know when to make the switch?  If you use commercial software when should you upgrade to fund accounting software?  Should you buy fund accounting software right from the start?  Let’s look at three aspects of software: differences, function and training.  This comparison should give you a clear idea of what to use and why.

Differences

The primary difference between commercial software and fund accounting software are the types of tracking and reporting they offer.  Nonprofits are responsible for more types of reporting than commercial businesses are.  Therefore features such as tracking of restricted funds and their use, or separating and tracking funds for grants are not offered in commercial software packages.

Additionally, you may need the ability to track incoming monies across different time periods, easily produce reports that comply with both the Financial and Governmental Accounting Boards (FASB), and generate additional reports that verify the application and use of restricted contributions and grants.

Attempting to use a commercial program to separate, track and report on donations, grants and other contributions is like forcing a square peg into a round hole.

Function

The biggest question to consider is “Will this software perform the tasks we need it to perform?”  Look for tell-tale signs to decide if your commercial product is lacking in features.  For instance:

  • Is your staff repeatedly spending excessive amounts of time to produce reports or financial statements?
  • Is it difficult to maintain budgets, track restrictions for contributions or reconcile balances?
  • Is lack of security an issue?
  • Do you have grants for which you need to track and reports expenses?
  • Do you need to track and account for your fundraising activities?
  • Do you or your staff members constantly make the statement “I wish this software would…?”

If so, chances are you have outgrown the functionality of commercial products.

Training

Other than an integrated user’s manual and help index, some accounting products don’t offer training tailored to your organization’s needs.  Most nonprofits would find it beneficial to receive customized training in order to use the accounting package to its fullest potential.

Before making a decision, verify that your fund accounting software vendor offers multiple options like in-person, web-based and classroom training, for example.  It is also important to ask what types of support are available for the software as well as the cost (if any) for updates.

Other things to consider?

Confirm that whichever product you choose is FASB compliant.  You’ll also want to ensure your accountant is comfortable with your decision and that she or he is capable of operating within the software you plan to use.

Before making any decision, consider what accounting functions you go through in a typical day.  Outline any special needs you will have in the future due to downsizing, expansion, grants, etc.  Write down you questions and training requirements then compare the commercial and fund accounting products you’re evaluating to find the one that is best suited for your needs.

Related Posts:
How Can Nonprofits Measure Success and Impact?
February 22, 2018
How Can Nonprofits Measure Success and Impact?

How do you know if your nonprofit is making an impact—if your mission is a success? The answer to this question affects everything about your organization, from day-to-day operations to the success of your fundraising efforts. The National Council of Nonprofits alludes to five actions: Identify what success looks like to you. Make a plan…

Communication Service for the Deaf; A Sage Intacct Success Story
October 2, 2017
Communication Service for the Deaf; A Sage Intacct Success Story

Communication Service for the Deaf (CSD) is a 501c nonprofit organization based in the United States and New Zealand, providing a plethora of services to the deaf.  They recently worked with JMT Consulting Group to enhance their financial management solution by implementing Sage Intacct and Nexonia.  We recently sat down with Brad Hermes, CFO and…

CancerCare – Connecting Anyone Affected by Cancer With Help and Hope
March 30, 2020
CancerCare – Connecting Anyone Affected by Cancer With Help and Hope

There are over 1.5 million nonprofits in America, and all of them do important work. In such a crowded field, however, some organizations have a more significant imprint than others. CancerCare is a great example. The organization celebrated its 75th anniversary in 2019. As every nonprofit knows, sustaining the mission for year after year is…

Children’s Tumor Foundation – Fighting for Millions Across the Globe
November 25, 2019
Children’s Tumor Foundation – Fighting for Millions Across the Globe

The Children’s Tumor Foundation (CTF) has never set its sights small. The organization was inaugurated in 1978 with the mission to end neurofibromatosis (NF) – a genetic disorder that causes tumors to grow on nerves, leading to a variety of debilitating conditions. Though considered a rare disorder, NF affects 1 in every 3,000 babies born,…

 Back to Blog