Is tax season a time of time of stress, chaos, and panic or a relatively trouble-free period? Can you access the information you need in your accounting software, create reports, and track restricted funds, or does just logging on make you worry about crashing your computer?
The accounting software you use will make or break this time of year for you and can mean the difference between a painful tax season and an easy one. If you’re struggling to create reports, track expenses and complete the necessary tasks, it may be time for a new system. Maybe we can’t prepare your taxes for you, but we can suggest a few tools to help.
Over the last several years, we’ve talked to a number of nonprofit consultants and accounting specialists about the accounting packages they recommend, and we published summaries of their advice in 2006 and again in 2008. But, given that the world of technology doesn’t stand still, we felt it was time to revisit this topic and fill you in on what’s changed. We asked three consultants to review the advice that we published in 2008 and suggest new information or changes to the roster of accounting systems that might be warranted.
It turns out that, while the world of technology is dynamic and sometimes tumultuous, the accounting universe is a remarkably stable place. There were very few changes to the roster of recommended solutions. One mid-range package from our previous article, FundWare, became a casualty of vendor consolidation so there are only support resources listed for it now. We also learned about a recommended add-on suite, Serenic Navigator, which augments an existing mid-range solution. Beyond that, 2011 looks much like 2008 in the world of accounting software.
Who Needs an Accounting Package?
What type of organization should use an accounting package? The consultants we talked to agreed: every nonprofit can benefit from one. Even if you work for a small organization that makes only a few basic transactions a month — deposits, withdrawals and invoices, for example — an application like Microsoft Excel may not be enough. Truth be told, Excel is dangerous as an accounting tool, as there are no built-in safeguards to keep you from deleting a transaction or accidentally duplicating a line on a report.
Learning to use new accounting software can be daunting but in the long run it will save you a considerable amount of time. Most accounting packages allow you to create new reports, like a cash-flow summary or information for your Form 990 [note: the US equivalent of the government required nonprofit tax report]— at the touch of a button. And many will update your accounts automatically when you write a check or create an invoice.
Happily, affordable accounting software options do exist. Starting at only a few hundred dollars, such packages are recommended for organizations of up to a couple accounting users, several programs, and annual budgets up to $1 million. But many very small nonprofits with budgets below $50,000 use them as well.
An accounting package is a useful tool, but it won't make you an accountant. Think of it as a filing cabinet: you need the cabinet to hold your files, but you still have to set up a filing system. If you don't have an accounting background, you may want to hire a consultant or bookkeeper to help set up the software and define how you should use it. Expect this to cost two to five times the price of the accounting package.
- QuickBooks, by Intuit
The market leader in entry-level accounting software, QuickBooks is specifically intended for small business without much accounting experience. The system is relatively easy to get up and running, which can be a draw for small nonprofits. The Pro and Premier editions have greater functionality but are somewhat more complex to use. In general, however, QuickBook's chart of accounts and reporting functionality are more prescribed than a software package like Peachtree, so accounting-savvy folks who want to set up their books or reports in a particular way may find it limiting.
QuickBooks starts at around $230 for the most basic version and costs about $400 for a multi-user version with more features. Intuit also offers online versions starting at $13 a month for the entry-level edition, rising to $64 a month for the option with the most features. However QuickBooks Premier for Windows and QuickBooks for Mac are also available, with more info about nonprofit features.
- Peachtree, by Sage
Like QuickBooks, the widely used Peachtree comes in a variety of differently priced forms, beginning at about $70 for a basic version and running to around $1,000 for a more sophisticated multi-user version. However, Peachtree offers more flexibility than QuickBooks. It allows you to set up reports and accounting charts exactly the way you’d like, which is why those with accounting backgrounds tend to prefer it. It’s not as ready to use “out of the box,” however, and users are expected to have basic accounting experience. For this reason, it may not be the best choice for accounting novices.
Although it requires a bit more of an initial investment (around $1,000 for one user, including support), FUND E-Z is intended specifically for nonprofits. It allows more flexibility than QuickBooks or Peachtree in tracking restricted funds and creating nonprofit-specific reports.
Like Peachtree, FUND E-Z is designed for users who have some accounting background. However, the consultants we talked to reported that this application has a much smaller user base than QuickBooks or Peachtree, making it more difficult to find bookkeepers or consultants experienced using it. The basic principles are the same as any other accounting package, though, and accounting professionals should be able to pick it up quickly.
Options for Mid-Sized Nonprofits
If you have more than four or five users, an annual budget greater than $1 million, conduct business internationally, or need to track multiple programs, departments, and locations, you'll likely want to look beyond entry-level solutions to a more robust accounting software package. Such packages tend to cost from thousands to tens of thousands of dollars in addition to yearly licensing fees. You'll also need to consider the costs of implementing these systems, which can be equal to or greater than the cost of the software itself.
For more information on the multitude of general business accounting packages available — as well as some free assistance and tools to help you choose a package — visit the accounting information websites AccountingSoftware411.com, 2020software.com, and findaccountingsoftware.com.
The consultants who have contributed to our accounting articles over the years have been divided over the benefits of using a tool specifically intended for nonprofits. Some felt the basics of accounting are the same regardless of the sector and that it was best to go with the more widely used general accounting packages. Others felt there is a substantial benefit in using one of the packages specifically designed for 501(c)(3)s [US registered nonprofits], particularly when dealing with a number of different funds with different restrictions — for instance, unrestricted, temporarily restricted and permanently restricted classifications. As with any other software choice, you’ll need to assess your own needs and determine what’s important to you.
- Sage Fund Accounting (formerly MIP)
A solid option, Sage Fund Accounting is priced lower than others in this category at about $5,000 to $10,000. Sage provides strong support for tracking restricted funds and offers a good report writer.
- The Financial Edge, by Blackbaud
A complex, more expensive package for those with sophisticated needs, this system offers the ability to integrate with The Raiser's Edge (also by Blackbaud). But it requires expensive customization, and several consultants felt that integration was not worth the effort.
General Business Accounting Packages
General accounting packages tend to be much more widely used than those targeted specifically to nonprofits, which often makes it easier to find people to help with setup, support and bookkeeping. If you need to track inventory, billable hours, or similar things, these business systems can also offer support not provided by most nonprofit-specific packages.
- Dynamics, by Microsoft
Microsoft's familiar lineup of accounting packages — Solomon, Great Plains, and Navision — are now known as Dynamics SL, Dynamics GP, and Dynamics NAV. They’re widely used among midsized to large nonprofits and within the businesses world.
Dynamics SL (formerly Solomon) is geared toward project- and service-based organizations and allows a substantial amount of flexibility. Dynamics SL falls within the $15,000 to $30,000 price range. Dynamics GP (formerly Great Plains) is a strong and widely used standard accounting package geared toward medium-to-large-sized businesses. Pricing for this package comes in around $50,000 to $250,000, not including configuration or additional consultation.
Dynamics NAV (formerly Navision) is designed to be highly customizable for those with complex needs and who want to start with a blank slate. Licensing costs are comparable to Dynamics GP, but if you require extensive customization, this software solution can be considerably more costly to implement ($100,000+). NAV’s functionality is enhanced by Serenic Navigator, a Dynamics NAV extension designed specifically for nonprofits. It supports both fund and financial accounting and provides support for grants, donors, and investments. The price starts around $50,000 and can reach upwards of $100,000 to $200,000 as modules, users, and functionality are added.
- Sage ERP MAS 90, by Sage
Sage ERP MAS 90, created by the same company that makes Sage Fund Accounting, is targeted primarily toward manufacturers. If your organization requires sales order entries or goods tracking, Sage ERP MAS 90 could be a good bet. It is comparable in price to Dynamics SL at about $10,000 to $30,000 in licensing fees.
Options for Large and International Nonprofits
The tools listed above will support the needs of the vast majority of nonprofits — unless you have hundreds of millions of dollars to manage, more than a hundred accounting users, or a complex, multi-unit national or international structure. If that's the case, you'll need an enterprise package tailored to your specific needs, such as Oracle’s JD Edwards World Financial Management, Microsoft Dynamics AX, or Lawson Software. The prices of these packages tend to start in the six figures. If you are ready to make this kind of investment, you should certainly look beyond this article for expert advice.
Where do you go from here? As with any software package, start by understanding your needs — including the accounting procedures you will follow. If no one at your organization has accounting expertise, you may need to ask an outside expert to help with this. If you're looking at larger packages, consider issuing a request for proposal (RFP). For more on RFPs, see TechSoup’s RFP library.
Before making any decisions, talk to vendors and look at the tools, download trial versions if available, and talk to other organizations that use them to understand how well the applications can support your needs. And don't forget to factor in the costs of setting up and training users in your new system.
With some diligence, you can make the tax season a pleasure… or at least a little easier.
Thanks to TechSoup for the financial support of this original article and its update, and to the nonprofit finance and technology professionals who helped with it:
- Eric Fraint, Your Part-Time Controller LLC (2008)
- Tim Johnston, Blue Cross Blue Shield (2008 and 2011)
- John Kolp, Help USA (2008)
- Robert Lane, Ph.D., Lane Services LLC (2008 and 2011)
- Jack McMillan, TechBridge (2008)
- Rick Mlekoday, RCM Tax (2008)
- Ruth Stevens, Grant Thornton LLP (2008 and 2011)
*This article — updated from a 2008 version — is courtesy of Idealware, which provides candid information to help nonprofits choose effective software.