Innovating the way you manage money

Fund Accounting

Innovating the way you manage money

Let's face it... crunching numbers and keeping track of dollars and cents is not most people's idea of a good time. With that being said, no matter what industry your organization operates in, Accounting and Asset Management is something that absolutely has to be done right. As your organization grows and becomes more complex, it becomes more important than ever to have the systems and tools in place to ensure the right amount of money gets to the right place at the right time. Fund accounting is a system used to track the amount of money allocated to various operations within an organization.

Fund Management systems give you the tools to ensure money gets to the right place at the right time

What is Fund Accounting

Fund Accounting is a system designed to ensure funds are used productively and for the benefit of the organization. For example, when a nonprofit organization receives a donation of $500 from a donor, that money can be dedicated to a particular program, used to pay for operational costs, or go towards your next fundraising event. The money gets to the right place at the right time and is not collected as profit. Here are a few ways Fund Accounting can help your organization:

Ensure funds are distributed to the right place for the right reason

Keep a firm grip on where money is going

Let's say a nonprofit needs to allocate $10,000 toward fund A, $5,000 to fund B, and $12,000 to fund C. They need to ensure that every penny gets to the right place but they already have a grant that covers $8,000 for fund A. In this situation they only need to allocate $2,000 more to fund A and the remainder can be used for fund B and C. This can be difficult to keep track of if the system of accounting is not primarily focused on allocation of funds.

Ensure your organization has the funds necessary to continue operating

Fund accounting allows nonprofits to clearly understand how much of their budget is used on various fundraising, program, and operational expenses. This helps the organization to create more accurate plans for the future and ensure there is always enough money to continue operating.

Help meet IRS reporting requirements

501(C)(3) organizations are required to report their finances to the IRS, and not only the amount of money but how the funds were used specifically. For nonprofits, this is done through Form 990. In order to remain tax-exempt, it is extremely important to have a system that tracks how resources were used.

Help honor any restrictions placed on assets

When money is donated to a nonprofit for a particular cause, the donor expects that those funds will be used for the intended purpose. Fund accounting can help ensure that restrictions placed on particular funds are honored and the expectations of the donors are met. If a system is not organized and the proper emphasis is not placed on how money is used, it's difficult to ensure all your organization's promises are kept.

Summary on how Fund Accounting can benefit your organization

To wrap all this up, Fund Accounting allows organizations to ensure they remain accountable to their donors and to their end goals. Having a system of organization that makes it easy for nonprofits to track their funding and how it's allocated is key to ensuring the mission is accomplished and the highest level of integrity is reached. To learn more on how Industry Software can help your organization implement a fund accounting system, contact us today. We specialize in creating solutions specific to your needs with industry leading support.

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