Financial Accounting may not be the sexiest topic in the nonprofit world, but it should be priority one for nonprofit organizations. Why? Because financial health is number one in the top three things Charity Navigator looks for when assessing nonprofit ratings.
These ratings are used to guide donors who are considering donations. In 2015 there were 9 million visits to the Charity Navigator website, and the organization estimates the impact to be $10 billion in donations each year.
The website guidelines state that in compiling their rating they look at financial health; accountability and transparency; and results reporting.
It all starts with financials and reporting – which makes it that much more critical to have an adequate financial software solution implemented within your organization. A list of criteria and associated weighting can be found here.
Charity Navigator provides two very helpful definitions that are worth taking a look at:
Accountability is an obligation or willingness by a charity to explain its actions to its stakeholders.
Transparency is an obligation or willingness to publish and make available critical data about the organization.
Sound financial data and reporting is the foundation of both accountability and transparency. Access to timely financial data allows for better decision-making and better responsiveness to stakeholders.
Or, put another way, you can achieve neither accountability nor transparency without the ability to deliver needed reporting quickly – rather than weeks after the fact.
Making an investment in the right accounting software is a big decision for every nonprofit. Keep in mind there will be tremendous gains you will enjoy in terms of efficiency and cost savings. The right accounting software will allow you to generate a majority of the reports you need directly from the accounting system, dramatically reducing the number of spreadsheets needed.
New technology in the form of cloud-based system can drastically reduce costs for nonprofits. If your accounting system is cloud-based, it means complete elimination of costs associated with on-site servers – and those costs are substantial. With a cloud solution, the publisher provides the servers (via a state-of-the-art server farm) and maintains the servers. As far as the devices you would use to access the solution, as long as you have access to the Internet and a browser, you can access the accounting solution on any device – laptop or tablet, desktop or smartphone, Mac or PC.
In our work with nonprofits opting for cloud-based accounting, they’ve been able to enjoy a much greater degree of automation – redundant, low-value activities are now handled within the accounting system, freeing up accounting personnel to work on more strategic activities to better benefit the organization, including accountability and transparency.
Armed with the right technology and accounting software, you are far better equipped to respond to the challenge of accountability and transparency. And, when you are able to quickly and accurately deliver the key data highlighting the key outcomes and results of your organization, you will most likely see an increase in the number of donors and grant awards.