Transparency and detail reporting is increasingly important for nonprofit organizations. And when each funder has different requirements for reports, flexibility is a key component of your accounting system. Below are three ways you can use your accounting system to meet the needs of your funders, increasing donors’ desire to remain committed to your organization:
Isolate activity for each revenue source
Setting up your chart of accounts to accommodate fund-based accounting lets you create reports with each funder’s requirements. Then, you’re able to provide custom reports without jumping through too many hoops. The individual reports you generate also help your organization look at donors from multiple angles, such as by project, time frame, or geography.
Track general vs. restricted funding
When funds are designated for specific purposes, they’re restricted from general use. Setting up your accounting system to reflect your cash flow of general vs. restricted funding is quite helpful for getting an accurate financial picture of your organization. Such accounting designations let you view metrics such as current balance and actual vs. budget projections over whatever time periods you choose. This is particularly helpful when dealing with designated funds that come from grants. You’re able to quickly provide the reports donor’s need, without sending your staff into a panic to gather information.
Demonstrate financial transparency
How you respond to donor requests for information creates a sense of confidence – or lack of confidence – about the security of the investment entrusted to you. In such a competitive market for funds, your timely response, clarity, and flexibility give your organization an advantage in maintaining donor satisfaction. Having a transparent accounting system can also be used to facilitate audits, so that auditors can log in from offsite to review the information they need.
If your current financial software can’t perform the above tasks, consider switching to cloud-based accounting. The transition is not as complicated as it sounds, and your organization can save money, be more productive, and ensure reliable results and reports. Such a system lets you have the advantages of major nonprofit organizations, regardless of your size. For more information contact Becky DaVee, CPA at Salmon Sims Thomas.