An NGO or charity answers to more people than an ordinary business does: donors, funders, trustees, regulators and the communities it serves. Its accounting software has to produce records that all of them can follow. A product that suits a trading company can still fall short here, so it pays to know what to look for before you commit.
This guide covers the features that matter most, and it starts with the requirement that most often decides the choice.
1. Check whether you need fund accounting
Some money arrives with conditions: a grant for one programme, a donation for a specific project, a gift that can only be spent on a certain purpose. This is often called restricted funding. Some funders and regulators require reports that show, fund by fund, what was received, what was spent and what remains.
Software that does this is usually described as having fund accounting. It is a specialist requirement, and it is the first thing to confirm with your funders and your auditor. If you need it, ask each vendor to show you a report of income, spending and balance for a single fund. Using projects or cost centres as a workaround is possible in some products, but it is not the same thing.
Fox Pro Accounting's features for NGOs are described on the NGOs & Charities page. It does not include dedicated fund accounting, so an organisation whose funders require fund-by-fund reporting should check that requirement carefully before choosing any product, ours included.
2. Recording donations and other income
- Can you record donations and grants against the income accounts you define, with a clear reference to the donor or source?
- Can you record income when it is received and keep a separate record of any amounts promised but not yet received?
- Can you attach supporting documents, such as a grant letter or a deposit slip, to the entry?
3. Budgets by project
Trustees and funders want to see whether spending is tracking the plan. Look for budgets that can be set by project or cost centre and compared with actual spending in a budget-versus-actual report. The comparison should read from the same records as the ledger, so there is no second spreadsheet to keep in step.
4. Approvals and separation of duties
An NGO often has several people entering and approving spending, sometimes in more than one location. Check that the software can require approval before an expense or payment is posted, and that permissions can be set by role, so the person entering a bill is not the person approving it. See our guide to permission design for a small finance team for how to set this up.
5. A complete audit trail
Auditors and funders will ask who recorded a transaction, who approved it, and whether it was ever changed. The software should keep that history automatically and make it easy to trace a figure in a report back to the entry behind it. An audit trail that depends on someone remembering to document changes is not enough.
6. Multi-currency
Many NGOs receive grants in one currency and spend in another. Make sure the software can record transactions in foreign currencies, apply exchange rates, and revalue balances at period end. Our article on realised and unrealised exchange differences explains what these entries mean.
7. Reporting you can hand to a trustee
- A balance sheet and an income statement with a comparison to the previous period.
- Budget-versus-actual reports by project.
- A way to export reports to Excel or PDF for board packs.
8. Access for auditors and trustees
Some organisations want trustees or auditors to be able to view the books without being able to change them. Ask whether read-only access is possible, and how access is removed when someone leaves.
9. Cost, discounts and written terms
Many vendors offer special pricing to registered nonprofits. Ask what documents they need to verify your status, how long the offer lasts, and whether the terms are confirmed in writing. Fox Pro Accounting verifies the organisation before an offer is made and confirms the offer and its terms in writing, as explained on the NGOs & Charities page.
A checklist to take to any vendor
- Can you report by fund if our funders require it?
- Can we budget and track spending by project?
- Can spending require approval before it posts?
- Is there an automatic audit trail?
- Does it handle the currencies we receive and spend in?
- Can we export reports for trustees and funders?
- What are the discount terms, in writing?