It’s practically impossible for any business or organization in any industry to thrive without the use of technology. As technology becomes more advanced and the world becomes more reliant on these systems to stay connected, integrating tech features into your nonprofit is almost a requirement for success. 

Nonprofit organizations can use technology to improve their efficiency, expand their reach, and make their existing financial processes more effective. You don’t need to have a dedicated IT department or a tech guru on staff to benefit. Finding new ways to use technology is something that any organization can do across areas like communication and engagement, as well as fundraising and financial management. 

If you think your nonprofit needs a hefty budget to work with various tech products, think again. While highly sophisticated tech programs may be out of reach for many organizations, there are options across the cost spectrum, so any nonprofit can find something that fits its needs. Plus, implementing tech improvements in targeted areas can lead to lower operational costs and higher donations, so the initial cost is an investment that essentially pays for itself. 

Where to Use Technology in Your Nonprofit

Do you need more social engagement with potential donors and volunteers? Is there a disconnect between remote team members? Are nonprofit finances monopolizing your time? How you choose to integrate technology will depend on what specific areas your organization needs it the most. With that being said, many nonprofits find that managing their finances is an especially challenging task. 

Between managing employees, rallying volunteers, creating programs, and connecting with people who need their services, nonprofits rarely have time to give their financial management the attention it needs. Whether you know close to nothing about nonprofit finances or have a wealth of knowledge on the topic, financial management technology is beneficial. It allows you to focus on what’s most important – expanding your organization’s reach and helping those in need. 

Software as a Service (SaaS)

Many technologies that can provide solutions to the above questions can be solved with software-as-a-service or SaaS products. Companies create these software products that are targeted to resolve a specific issue that your nonprofit might be having. These products are built on a subscription model, so you can experiment with which solution your nonprofit prefers with a low cost up front investment. Examples of well known SaaS products are: Slack, Zoom, Donorbox, Salesforce, and more.

Financial Management

Technology for nonprofits can improve your data collection and allow you to make more informed analyses and reports. Certain softwares can help you better manage cash flow and allocate resources. Strategic planning, regulatory compliance, and fundraising can also benefit from targeted integration of technology. 

Access to grant funds is becoming increasingly competitive, so proving your organization’s effectiveness and presenting your service outcomes in a clear, convincing way is crucial. Tech tools can make applying for grants simpler and improve your chances of receiving grants. Further, donors want to know that their money is making a difference. Data-collection tech is an easy way to show the impact of an organization’s programs and show your donors exactly how their money is helping.

Even something as small as using accounting software tailored to nonprofits can make a significant difference in how your organization operates and the effectiveness of its systems. These programs help streamline nonprofit finances, and some programs even offer assistance with filing Form 990s at tax time. 

Artificial Intelligence

The rise of AI in the past year can benefit the world of nonprofits as well. Nonprofit treasurers can ask an AI chatbot for help with annual budget creation, with explaining complicated financial concepts or with just about anything! These chatbots are available mostly free of cost and can assist any member of a nonprofit board with their daily tasks.

Nonprofit Bank Accounts

Another area in which nonprofits can benefit from services targeted at their unique needs is banking. Business bank accounts and basic checking accounts are unlikely to fit the bill. Managing your various costs – operational, administrative, and program expenses – is cumbersome without the proper tools and systems. Choosing the right nonprofit bank account can also help you in other areas of operation, such as fundraising. 

How can a tailored, technology-driven nonprofit bank account help your nonprofit thrive? You’re likely to find it easier to manage and monitor your donations and expenses, process additional forms of payment, pay employees, and file your tax returns. As a nonprofit organization, your banking needs differ from those of an individual or a for-profit business. Banking with an institution that is familiar with your specific concerns is important for the success of your mission. 

Crowded Bank Accounts

Crowded offers bank accounts tailored specifically for nonprofits, which means its accounts and services were created with organizations like yours in mind. Crowded has no monthly fee, or minimum balance requirements, and includes unlimited free transactions. Plus, you can set up and manage your account completely digitally. 

Crowded understands how nonprofits function and what financial services they need to run smoothly. Collecting payments, controlling member spending, and establishing passive fundraising programs are all simpler with Crowded. 

Innovative Ways to Fundraise

Having a personalized place to put your donations and funds is helpful, but how can you raise money for your nonprofit and use technology to increase charitable giving?

Finding new and more effective ways to raise money for your nonprofit is the only way to continue operating and making an impact. Technology offers a tremendous opportunity to diversify your fundraising efforts, from fundraising software to donor communication systems. 

Fundraising software

Using a software geared towards fundraising can help your nonprofit reach your fundraising goals. These softwares can help you track donations and donors, create targeted messaging and marketing efforts and more. All of these technological advances are sure to bring in more donations to your nonprofit organization.

Shop-to-Give Programs

Your organization can receive free donations from shop-to-give programs, which allow shoppers to allocate a portion of their purchase each time they buy something at participating stores. You can make receiving funds from this method even simpler if you bank with Crowded because of their Crowded Rewards. 

Crowded’s shop-to-give program is a cashback fundraising tool that generates money for your nonprofit at no additional cost to your donors or to you. It takes minutes to set up, is endlessly scalable, and offers cashback on purchases at over 70K+ retailers. Your organization will receive 50% of the cashback earned by donors, and since supporters will still receive a portion of their cashback, this further incentivizes them to participate. 

Peer-to-Peer Fundraising

You can utilize peer-to-peer (P2P) fundraising to increase your donations through existing donor networks. Your current donors can create fundraising pages that broadcast your nonprofit’s mission and message to people in their social circles. This is an effective virtual strategy, and it presents a nearly passive method for connecting with new donors and increasing charitable giving.

Peer-to-peer fundraising operates on a large scale to raise awareness of your mission and expand access to donation sources. It also offers the added benefit of increasing volunteer and supporter engagement. 

Virtual Events

Fundraising events have long been a popular way to raise money for good causes, and with the help of technology, these events can be held virtually. Hosting virtual events means donors from any part of the world can attend, supporters with mobility or transportation challenges can participate, and your events won’t be limited by the physical space you have available. Your organization can get creative when planning virtual events and broadcasting live to supporters. Consider streaming a play, concert, ballet, or other live performance. You could organize an online auction, virtual black-tie gala, or trivia night. 

Website Giving

Giving through a nonprofit’s website is a popular cash flow source for nonprofits. If your website does not provide this option already, this is something you will want to implement as soon as you can. When visitors to your website browse your mission and programs pages, they will feel inspired to help. Don’t make it more difficult by leaving out an online giving page. Facilitate charitable giving by creating an online form where your donors can securely make donations right from your website. 

Technology and Your Nonprofit

How you use technology to improve your nonprofit overall, and its finances is dependent on your needs, goals, budget, and capabilities, but don’t feel limited by these parameters. There is technology that can make a difference in day-to-day operations, strategic planning, program implementation, or financial management for every organization. 

Implementation

Create a wishlist of technologies that you want to implement in your nonprofit organization. Figure out what would you need and what’s in your way before adopting that new technology. Recruit the right people from within your organization who can help you achieve those goals! Remember, ultimately technology is meant to make your job easier!

How to Implement a Chart of Accounts for Nonprofits

Getting your nonprofit accounting organized isn’t fun but it’s worth it. Whether your nonprofit is just getting started or your financial reports have felt chaotic and unhelpful, it’s time to implement a chart of accounts. If you choose to hire or consult with a nonprofit accounting firm, their first step is integrating a complete and cohesive Chart of Accounts (COA). The COA actively serves as both an index of account numbers and names and a resource for categorizing all financial activities. In this guide, we’ll walk you through how to implement a chart of accounts for nonprofits into your organization’s financial management.

What is a Chart of Accounts?

A Chart of Accounts actively lists all the accounts a company or nonprofit uses to record financial transactions. We can view it as a map that helps navigate an organization’s financial landscape. Each account in a COA represents a different type of financial transaction, such as revenue, expenses, assets, liabilities, and equity. It generally includes a numbering system for easy identification of each account, and people use it to organize financial data and generate financial statements. By using it, maintaining precise financial records, making data-informed decisions, and adhering to regulatory obligations becomes much easier.

Since nonprofits must comply with specific regulatory requirements, a COA tailored to their activities can help ensure compliance. A well-organized COA provides clarity and transparency around the organization’s financial activities, making it easier for donors to understand how their contributions are being used. Similarly, a COA helps nonprofits make informed decisions, such as identifying cost-effective programs or areas needing cuts.

Steps for Nonprofits to Implement a Chart of Accounts

1. Analyze your organization’s needs and objectives.

Your COA should align with the specific needs of the organization and reflect its unique financial activities. For example, a nonprofit that relies heavily on grant funding may need to create specific accounts to track grant income and expenses. Similarly, an organization that holds regular fundraising events may need accounts to track funds raised and associated expenses.

Questions to ask:

• What financial reports do we need to create?
• What information must our financial reports include?
• What level of detail does each financial report require?
• Are there any specific regulatory and compliance requirements for the reports?
• Will grant reports require specific accounts for separate transaction types?
• How many accounts do we need per financial transaction and what level of detail per account?
• Do we need to track financial information for multiple locations and/or departments?
• How frequently must we generate financial reports and who will use them?
• What are the (KPIs) we need to track and how will they get reported?

2. Define the Chart of Accounts Structure

Establishing the COA structure involves determining the account categories and numbering system to organize financial data. This ensures transactions consistently get recorded and categorized, easing financial management, report generation, and regulatory compliance. Defining the COA structure also ensures that all financial management team members use a uniform system, reducing errors and ensuring accurate reporting. A well-structured chart of accounts for nonprofits is key for organizational success.

Identify Accounts

What accounts are needed for financial reporting? Reporting is critical for nonprofit financial management, and having the right accounts enables accurate reports.

To identify necessary accounts, consider specific reporting requirements like taxes, grants, or other forms.

Decide on the Numbering System

The numbering system should be universally understood as it organizes accounts and transactions, enabling individuals to easily access and use data.

Also, an understandable system ensures consistency in recording and processing transactions, reducing errors, and facilitating reporting. Well-structured numbering helps individuals quickly navigate the chart of accounts.

For example, a numerical sequence like 1000, 2000, 3000 is easy to understand and use. Also, ensure the system is logical and follows a consistent pattern, like grouping similar accounts or reflecting the organizational hierarchy.

Organize Accounts into Categories and Subcategories

When organizing accounts into categories and subcategories in a COA, several approaches can be used:

• By Account Type: Categorize accounts based on type – assets, liabilities, equity, income, expenses. This is common and helps individuals understand the different financial transaction types.
• By Function: Categorize by function – administration, fundraising, program delivery. This shows how resources achieve the mission.
• By Product/Service: Categorize by product or service offered. This shows financial performance of each.
• By Location: Categorize by location of transaction – office, program site. This shows performance by location.
• By Time Period: Categorize by transaction time period – monthly, quarterly, annually. This shows performance over time.

3. Set Up the Chart of Accounts

After covering the bases, it’s time to start building the chart of accounts and splitting them into the Balance Sheet and Profit & Loss categories.

Feeling a bit overwhelmed already? Velu offers free consultations to help guide you in establishing proper financial organization. 

Balance Sheet

The balance sheet provides a financial snapshot. Include:

• Assets: Owned resources that can generate future economic benefits like cash, accounts receivable, inventory, equipment.
• Liabilities: Obligations owed to others like accounts payable, taxes payable.
• Equity: Residual interest in assets after liabilities. Further broken into retained earnings and contributed capital.

 

Profit & Loss

Shows revenues, expenses, and profit/loss over a period. Also called income statement.

• Revenue: Income from sale of goods or services.
• Cost of Goods Sold: Direct costs of producing/delivering goods/services sold.
• Gross Profit: Revenue minus Cost of Goods Sold.
• Operating Expenses: Normal business costs like rent, salaries, marketing.
• Net Income: Profit or loss after expenses deducted from revenue.
• Other Income and Expenses: Revenues/expenses not related to core operations.

4. Implement Tech Stack: Maintain the Chart of Accounts

Ensure the COA integrates with other software like donor management and budgeting/forecasting to maintain consistent data and accurate reporting. Financial information should be accessible to key stakeholders when setting up the chart of accounts. These may include board members, investors, donors, managers, and others needing to understand the financial health and performance.

The COA should have robust reporting processes generating accurate, timely reports designed for easy understanding and customized to each stakeholder group. For example, high-level overview reports for boards and detailed program performance reports for managers.

Should you use QuickBooks or alternative software?

QuickBooks is popular with nonprofits and small businesses for its ease of use. It allows integrating other applications like donor and budgeting software, enabling consistency. QuickBooks can be a great platform for implementing and managing a nonprofit chart of accounts for nonprofits.

When choosing software, consider your nonprofit’s size, transaction complexity, and number of users needing access. Compatibility and required technical expertise also matter. While some options are user-friendly, others less so.

5. Test the COA for Accuracy

Testing the COA accuracy is critical in setup. Conduct a trial balance – a report listing all account balances. It identifies errors like misclassifications, incorrect balances, or inaccurate descriptions. Comparing to financial records verifies COA accuracy and proper reflection of activities.

The setup should include COA training and guidelines for employees on proper account use. This ensures they understand each account’s purpose and proper transaction recording, increasing financial literacy. Employees can then better identify risks/opportunities, make informed decisions, and contribute to financial health.

6. Establish Best Practices for Team

Three COA setup best practices are: don’t delete old accounts, have a process for modifications, and aim for simplicity and consistency.

Rather than deleting, mark old accounts inactive or archived to preserve historical data. This data can provide useful future analysis while maintaining integrity.

Have a process for periodic COA review and modification as needs change over time.

Design for simplicity and consistency – group accounts reflecting activities, develop clear, concise account descriptions accurately reflecting purpose. This improves COA usability and understanding, enabling better financial management and decision making.

7. Monitor COA Use and Compare Budget vs. Actuals

Monitoring COA use and comparing budget to actuals keeps you financially on track. Establish regular meetings to ensure alignment and identify discrepancies. Adjust spending accordingly and make informed financial strategy decisions.

Comparing actuals to budget identifies variances and whether budget or spending adjustments are needed. This information enables informed financial goal decisions.

Remember, monitoring and budget versus actual comparison should be regular routines to achieve financial goals.

Get Started Implementing a Chart of Accounts

In summary, a well-organized chart of accounts (COA) is crucial for accurate reporting and decision-making. To successfully implement a COA, key steps include identifying accounts, creating a numbering system, and establishing hierarchy.

Accounting software can significantly streamline COA maintenance by reducing errors and increasing efficiency. A well-maintained COA enables easy transaction tracking, report generation, and issue identification.

There’s plenty of help available to assist you in establishing proper financial organization for your nonprofit and we hope this guide was useful in getting you started.