A fund is a unit of a financial organisation with a self-balancing set of accounts which record cash and assets, along with related balances and liabilities. Fund Accounting Software allows not-for-profits and government organisations to create financial statements and balance sheets for each fund. They can separate funding amounts and spending by individual project or grant provider.
With a not-for-profit accounting system, you can also generate reports that make clear how each funding amount is used responsibly and how much it complies to its original purpose. This article explains what Fund Accounting Software is, its benefits, and how to choose Fund Accounting Software.
What is Fund Accounting Software?
Fund Accounting Software keeps track of your funds, expenses and transactions. Instead of focussing on maximising profits, Fund Accounting Software aims to provide a business with accountability and stewardship for all of its accounting processes. A not-for-profit organisation that uses such a solution should find that they have more transparency, accountability and efficient spending. Contained in the system is a self-balancing ledger designed for any specific project, grant or donation.
There are other vital functions of Fund Accounting Software, such as financial reporting, which creates financial statements, measures fundraising performance and donor retention. Grant management follows the course of awards and proposals, handles funds and properly allocates them to recipients. Fundraising and donor management safely solicits, collects and administers donations through fundraising channels and campaigns. It can manage existing donor sources and recruits prospective supporters as well.
Depending on your organisation, there are many various types of fund. For example, a government fund can include
- Permanent fund
- General Fund
- Special Revenue Fund
- Capital Project Fund
- Debt Services Fund
Not-for-profit funds, on the other hand, are usually more specific – receiving labels linked to specific activities, such as Medical Expenses Fund or Scholarship Fund. However, what is important to realise is that each fund is separate, meaning that they should balance on their own. You should also be aware that most fund accounting is very different from traditional accounting, so your business can benefit greatly from investing in specific fund accounting software.
Fund Accounting Software circumvents some of the problems that can occur when a not-for-profit or government entity tries to use software tailored to commercial operations. Organisations can try to use departmentalisation at the general ledger level, when fund accounting could more easily deal with the same thing. Though you’ll be able to stay on top of your accounts and expenses, it’s not likely that you’ll have the controls in tracking assets and liabilities required to generate accurate balance sheets. All organisations, whether commercial or not-for-profit, want to be as efficient as possible, and Fund Accounting Software delivers an approach to accounting that can remove the need for the time-intensive workarounds that commercial solutions require.
What Should I Look for in Fund Accounting Software?
Price and Ongoing Cost
The price of a solution will not be your only cost. A system will also have associated costs of maintenance, support, training, consulting and conversion associated with it, all of which you’ll have to consider when looking for Fund Accounting Software. Some systems can be deceptive – low-priced software that needs customisation can end up costing a fortune to install and maintain. Try to get a clear idea of how much a solution will cost overall before you settle on one.
Getting a cheap system is all well and good, but it’s useless if it doesn’t provide you with the benefits you need. Taking this into consideration will stop you from paying for functionality that won’t provide anything in return.
Make sure that the basic functionality of Fund Accounting Software is available. Then have a think about the needs of your organisation. How big is your organisation? How complex are your processes? How powerful does the reporting function have to be? What are your future needs likely to look like? Once you have a good idea of your requirements, check the features of each solution against your list of needs. Make sure you understand the benefits of each feature.
Think about whether you would benefit from multifaceted reporting capabilities, and if you would, how complex it would have to be. Make sure that the reports can be run on a range of dates with overlapping fiscal years, and in the formats you currently use. Check to see how easy it is to create custom reports as well.
There is no point in implementing Accounting Software that will be outstripped when your organisation grows to a point where its functions are no longer useful. If you can buy the modules you need now with the ability to add more later, then you can have a growth path whilst still retaining budget flexibility. This is achievable with a modular system and product upgrades.
Audit trails give a complete documented history of a transaction. They make transparency easier by allowing examiners to trace the financial data from general ledger to source documents like receipts, invoices and vouchers, and form the basis for objectivity in your organisation. You can find out about the audit trail capabilities of a particular solution by acquiring references from accountants who audit companies that use the software. You can also ask other organisations about their audit experiences.
The most effective Fund Accounting Software has open architecture that allows it to communicate easily with other accounting and non-accounting related software. This means that you can choose the highest quality software packages for each function you need, without having to stay fixed to a single software provider.
There are a lot of considerations to be made when choosing your next Fund Accounting Software. Going through every option takes a lot of time and money, and there’s no guarantee that you will end up with the right solution.
YourShortlist, we can find the right Fund Accounting Software for you. We offer expert, non-chargeable buying advice, and can provide a shortlist of potential software vendors depending on your specific requirements. Leave your details on our contact page, and find the solution you need today!