It’s valuable to consider some tried and true best practices when using a fund accounting solution. We wanted to share some with you that customers have shared with us over the years. We also know you’re in the middle of budget season and that might mean looking for a new fund accounting solution as well as ensuring you’re using your current solution in the best ways.
Fund accounting is primarily used by nonprofits, organizations, municipalities, and educational institutions. While for-profit companies sell goods or services to earn income, nonprofits rely primarily on donations and grants. This makes it advantageous (and necessary) for nonprofits to establish a system of fund accounting.
There are some time-saving best practices to ensure your fund accounting is transparent, audit-friendly and easy to use.
Best Practices in Fund Accounting Include:
- Make sure your fund accounting (and the solution you use) is built for the long-term of your accounting needs, not just the short term. Many grant funders and other funding sources provide multi-year grants and having a solution that can successfully compare and report transparently how funding has been used year to year for those grantors is a key component in successful reporting.
- Make sure your data tells the story of how you spent grant money in your organization. Make sure you can show how the money was spent and what it was spent on. For example, check throughout the year if the expenses are correctly recorded in the right fund. Being pro-active about checking your input of data is a valuable way to ensure you have a good process in place for catching any errors and fixing them before an audit!
- Stay organized. Organization is the backbone of effective bookkeeping for nonprofits. When you have a complete and correct general ledger with all of the information you need for specific reports, you can feel comfortable pulling those reports whenever you have a need for them. Effective nonprofit fund accounting software will easily store data and automatically generate the reports you need.
- Meet frequently with key staff including your finance and staff in the field to determine if expenses or spends can be adjusted. Plan for what-if scenarios and use your data to help you determine how you can ensure you’re ready for those scenarios. By being able to track your budget with a strong fund accounting solution through multiple years, you will be able to easily compare and contrast your needs from past and present and plan for the what-ifs in the future.As your mission grows, so does your need for a versatile and future-focused accounting solution.
- A yearly best practice is to evaluate your current system and make sure it will grow with your mission in the future. Take time to think about your current expenditures in out-sourcing payroll/accounting needs and see if there are savings associated with bringing those in-house. Compare and contrast whether your organization would benefit from a cloud-based system or an on-premises software system. One of the important key features of MIP Fund Accounting is the freedom to choose between cloud-based or on-premises software.
In this year of resiliency, keep in mind too that you still have plenty of time to apply for a PPP loan. The SBA is currently offering PPP loans until May 31, 2021. Remember, you have plenty of time to apply for Loan Forgiveness as well. Keep an eye on this page, which is updated every month and details the loan amounts dispersed, as well as the loans forgiven to help keep you inspired as you gather your reporting for both.
“We use MIP in our accounting department, for budgeting, purchase orders, accounts payable, and cash receipts. It allows us to effectively track our monthly expenses through the customizable reports we are able to generate. There are also features in MIP that have helped us strengthen our audit compliance.” (T. Warren, Blackburn College)