Keeping track of the different reporting requirements can be arduous and burdensome for nonprofits and faith based organizations. Most basic accounting platforms for small to medium size organizations cannot handle the tracking and reporting that nonprofits need.
Impact #1: Net Asset Reporting & Tracking
The first is whether your platform can handle the division of net assets. Instead of an equity section in the balance sheet, nonprofits have net assets and are split into two major categories, Net Assets Without Donor Restrictions & Net Assets With Donor Restrictions. The icon below shows prior guidelines vs. new guidelines.
This type of reporting is used in nonprofit financial statements, Statement of Financial Position (which is a balance sheet type of report for nonprofits) and the Statement of Activities (Which is an income statement type of report for nonprofits). Using a software like Sage Intacct or Xero can allow your nonprofit to track these at a detailed level. Your Net Assets With Donor Restrictions have specific categories that are be tracked in the background. The image below shows how your financial balances can be visible in real-time showing you what is restricted vs unrestricted.
Impact #2: Specific Tracking for Net Assets With Donor Restrictions
One of the more tedious things to keep track of for a nonprofit is the detailed balances of each of the restricted funds. With cloud accounting and the correct virtual controller, a nonprofit can know the value of their different "buckets" or funds (and even funds that may not necessarily be restricted but designated by the board) at all times and in real-time.
Impact #3: See your Program Expenses, Supporting Expenses, & Fundraising Expenses
The last impact that I would like to discuss that a nonprofit has to deal with is the split out of their Statement of Functional Expenses. This statement is for the 990 that nonprofits file each year and if you are using something like QuickBooks, you will be needing to download the data into Excel and manipulate the information to create the amounts for each category that you need.
Fortunately, the proper cloud accounting platform will give you these reports at all times and the need for off-line data workbooks will not be necessary. Below is an image of a report that shows the functional expenses.
As you can see, a virtual controller with the proper tools can streamline your accounting and reporting process that gives your organization information that is informative and mission focused.