Effective financial management is crucial for all organizations. However, non-profits face unique challenges: They must ensure their funds are allocated appropriately while maintaining compliance with legal requirements.
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The right accounting software will streamline operations, ensure transparency, and simplify tax reporting. Here, we explore the best accounting software for non-profits and why it meets the industry’s unique demands.
What to look for in your accounting software
Fund accounting capabilities
You manage restricted and unrestricted funds, so you need software that can:
- Track grants, donations, and program funds separately
- Ensure restricted funds are used for their intended purpose
- Generate fund-specific financial reports
- Software that aids accountability
Donation and grant tracking
Since you rely on donations and grants, your accounting software should:
- Track donors, pledges, and recurring donations
- Generate donation receipts for tax reporting
- Integrate with fundraising platforms (like Donorbox or PayPal Giving Fund)
To do this, enhancing your accounting software with integrations that allow for automated accounts payable would be wise.
Financial reporting and compliance
To maintain transparency and compliance, you need:
- Highly accurate, often granular reporting capabilities
- Compliance with national or international non-profit accounting standards
- Robust payment run features
Implementing automated invoice processing could be a way to ensure all of the above. The built-in financial tracking and error reduction benefits will bring you up to scratch with industry standards.
Budgeting and expense management
Non-profits must carefully plan spending and track expenses so you’ll need to be able to:
- Create budgets for different programs and grants
- Compare actual vs. budgeted expenses
- Manage operating costs, salaries, and overhead
- Maintaining accountability through a robust PO system
User-friendliness and accessibility
As a non-profit, you might not have the cash to pay for top accounting talent. Therefore your software should be:
- Easy to use for non-accountants
- Cloud-based for remote access
- Provide role-based permissions for team members and board members
Integration with non-profit tools
Non-profits often use fundraising, CRM, and payroll software, so accounting software should:
- Integrate with software that aids financial management (Donorbox, Bloomerang, Zahara)
- Sync with fundraising and payment systems (PayPal, Stripe)
- Work with payroll and expense tracking tools
Zahara helps to complete all key aspects of the AP process.
Download Our Guide to AP AutomationThe best accounting software for charities
So what’s your best choice? The world is not short of charity accounting software. Which one you choose should depend on the size and ambition of your non-profit. Here’s what we’d recommend:
- QuickBooks – Offers donor management, expense tracking, and tax reporting. It provides built-in templates for non-profit financial statements and integrates with fundraising tools.
- Sage Intacct – Great for a larger charity, Sage Intacct can handle more complex financial reporting and grant tracking. It also offers real-time dashboards to monitor financial performance.
- Xero – A famed bit of cloud-based software, Xero allows multi-user access, donation tracking, and financial reporting. Xero also supports multi-currency transactions, making it useful for international charities.
- Aplos – Great accounting software for small non-profits, Aplos was designed specifically for charities and churches. It features donation tracking, automated reporting, and integrated email communication. There are, however, some drawbacks: the software doesn’t handle advanced accounting well, making it effective only for smaller organisations. It has limited growth potential and doesn’t offer many choices for integrations.
It’s worth remembering that Sage, Xero, and QuickBooks all integrate well with add-ons like Zahara, expanding their functionality beyond the basic versions.
Cloud accounting software for non-profits
These days the best accounting software is cloud-based, and it’s a feature you should be looking for when choosing accounting software. It will make accounts payable automation much easier, but the main benefit of cloud-based software is that it enhances security by providing automatic backups. You’ll also like the way cloud-based platforms enable you to handle your accounts remotely from decentralised points. Real-time accounting is another major perk, and not one to be overlooked.
Most of the main accounting platforms – Xero, Sage, QuickBooks – are cloud-based. It’s the way the game works these days and it’s a very good thing. The security benefits alone make cloud-based accounting software a strong choice, but the other perks seal the deal.
Free non-profit accounting software
As a non-profit you might be operating on a tight budget. If that’s the case there are a few free options out there. The free software will probably lack advanced features, but they still offer essential accounting functions like expense tracking, invoicing, and basic reporting.
Free software is a good starting point for non-profits with limited funds or ones that are in the early stages of business life. In the long term, though, you’ll need to figure out whether these systems are going to meet your long-term needs.
If you want our humble opinion, you’re probably better off paying a bit of money for an advanced system. Making the jump to new accounting software can be a costly and complex job – especially if your staff have settled routines with the old software.
If you want to charge on into the world of free accounting software, here are a few to consider:
- Wave Accounting
- GnuCash
- ZipBooks
- Manager.io
Financial accounting software for NGOs
NGOs require robust financial accounting software to handle multiple funding sources, grants, and donor contributions. Most standard accounting software won’t be able to handle this for you without some very complex rejigging. This is where integration comes in.
By integrating add-ons to your software you can handle much more complex workflows, enhance reporting functions, up accountability – you’re basically getting more bang for your buck.
Fund accounting software for non-profits
Fund accounting software is a financial management tool designed for non-profits, charities, government agencies, and religious organisations. It helps track and manage funds separately, ensuring that money is used for its intended purpose and maintaining standards are met.
It’s important that your software provides this kind of accountability, and again, you’re likely to find it in the form of an ERP integration.
We’ll talk here about Zahara, because that’s what we know best. Add-ons like Zahara will give you the kind of fund allocation tech and detailed audit trails that will help prevent fraud and keep your non-profit in compliance with the law.
Accounting software for small charities
Small charities require cost-effective, easy-to-use accounting software to manage donations, expenses, and financial reports efficiently.
We’ll give Wave Accounting a nod here again, but with the reminder that it may not be able to handle the scaling of your charity when you start to grow.
Because of that, the question comes down to choosing a software that gives you flexibility. We’d recommend Xero or QuickBooks in this case. Both are great for small organisations and start-ups. Both come with great potential for growth.
Xero integrates well with third-party fundraising platforms. QuickBooks offers an affordable plan with essential non-profit accounting features. It includes donor management and budget tracking. Both bits of accounting software offer wide integration capabilities with add-ons like Zahara that’ll boost your charity’s compliance and staff accountability.
Looks like you’ve covered a lot of info. We’re here to answer any questions you might have.
Accounting Software for Non-profits Conclusion
Selecting the right accounting software is crucial. Whether your organization is a small charity or a large NGO, there are software solutions tailored to your needs, but remember, you should be looking for:
- Cloud-based software
- Scalability (you want your charity to grow)
- Good integration capabilities – these will give your software legs
- Strong reporting functions, compliance benefits and audit trails – these can come from integrations, it’ll be hard to find them robust enough in vanilla accounting software
Obviously, budget is likely to be a concern for a non-profit… more so than for a non-charitable business. On this point, consider your ambitions. That free software might be tempting, but it won’t serve you well in the long run.
We know we’re biased here, being in the business of cloud-based accounting integrations, but take the rest of this as honest, well-intentioned advice – we are also in the business of curating useful information, too, of course…
If you want the best of the best, you’re going to want a system like Xero, Sage or QuickBooks, and you’re going to want to boost them with integrations. This will give you the highest-quality software, handle all the unique demands of the non-profit sector and give you better scalability.
A word from Zahara
If you’ve found this useful, maybe you’ll like some of the other info we’ve got on our blog. We also run the Totally Balanced Podcast, which covers aspects of accounting from the point of view of our CFO. Watch and listen on Spotify and Youtube.
Here comes the pitch: we’ve been in the world of accounts payable for a long time. Our customers would say we’re experts… We’d say that our software has been built with them in mind.
It’s also said that it works excellently for organisations that don’t keep stock on the shelves. That would be you, and you won’t be the first non-profit to put their trust in Zahara.
We’ve got plenty to say about how our software is the right fit for you. Give us a call, or schedule a demo. We’d love to hear from you.
