Following best practices for nonprofit grant management simplifies reporting accurate, timely information to grantors and donors.
Why Grant Reporting Is Complex
The business operations of nonprofit and for-profit businesses are largely similar. Each provides a product or service, and both types of businesses are invested in the overall satisfaction of their clients. However, the main goal of a for-profit business is to make a profit from their goods or services, whereas the main goal of a nonprofit is to provide a service to the community that otherwise is not provided by other businesses or the government. The primary source of revenue for nonprofits is from charitable contributions and grants.
Some of this revenue has restrictions placed on it by the funder.These restrictions on revenue create the major difference in financial reporting between for-profit and nonprofit organizations. Nonprofit financial reporting must segregate revenue into two main categories, without donor restrictions and with donor restrictions. Generating financial reports that reflect the use of these restricted funds can be difficult and time-consuming.
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Using Nonprofit Software to Streamline Reports
Many nonprofits use general business accounting software to track the receipt of grant revenue and the allocation of the funds to different programs. An efficient way to track your grantors is to use a fundraising system, where each grantor is entered in the system, with areas to enter contact information and any particular notes about the agency and the funds.
Ideally, an integrated fundraising and nonprofit accounting system shares data between staff members who work with grants and allocations. This gives everyone on the team access to the contact names and information for grantors, as well as allocation requests and the presence of any restrictions on the grant allocations. Having key information about past, present, and future grant requests is efficient for operations and makes it easy to generate reports for grantors.
Grant Management Oversight Maintains Transparency
Oversight for both the individual programs and the spending of each grant helps nonprofit agencies maintain transparency, important for securing future grants.
Three major ways a nonprofit accounting system can reduce complexity and simplify the process of reporting funds:
- Using outdated methods and older spreadsheets inhibits collaboration and makes gathering information more difficult.
- Automating grants management allows each user to have web-based access for reports.
- Streamlining and organizing grant rewards according to different filters provides timely and detailed information.
Automating Allocation of Restricted Funds
Integrating nonprofit accounting software into your grant monitoring and allocation practices ensures restricted funds are only going to the program or programs indicated by the grant award. Designating each individual grant and allocation into your accounting program allows you to name each grant and allocate the funds into the correct channels. Best of all, from a reporting standpoint, you can quickly pull reports by donor designation or program, reassuring donors that their grant monies are correctly allocated.
Separating your donor designations and programs results in more flexible reporting. You can assign funds for the discrete programs by the grant, giving you the ability to generate individual reports detailing performance for each program, as well as the correct allocation of each grant’s specifications and the role of those monies within the designated programs.
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Bottom Line
If you haven’t integrated business software into your nonprofit business practices it is a worthwhile expense. Automating allocation of funds to programs and tracking the spending for each program makes it easy to compile the information into an easily digestible report to give to grantors. Timely information establishes your agency as knowledgeable grant professionals and encourages more contributions. Plus, centralization of information makes executing each program in the agency more efficient.
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I loved that you said that adding nonprofit accounting software and help you make sure that funds will only go to the programs they have been assigned to by the grant award. A couple of days ago, my sister and I decided that it would be awesome to start looking into nonprofits in the area and figure out how they manage their funds. If I ever started a nonprofit organization. I would look for ERP accounting software to ensure everything works out smoothly.