How often have you asked, “How much did we spend on our core program so far this year?”

Seems like a basic question that any nonprofit executive should have at their fingertips, but often getting the answer can take days. Your donors aren’t patient, and your decision can’t wait until you have the right information – so you make a decision based on your experience. You’ll fix it once you have the right data.

No organization should rely on gut instinct alone when making financial decisions, and it’s not your accountant’s fault – it’s the tool they use.

Most nonprofits use Quickbooks on a desktop; it’s a comfortable piece of software for most bookkeepers and it’s faster and more full-featured than their online version. While Intuit has tried to make it convenient for nonprofits to adopt their software, the fact is, it’s often not the right tool for the job.

Quickbooks can’t satisfy these needs most nonprofits have:

• Use proper fund accounting that ties every transaction to a specific program or organizational goal.
• Pull up-to-date finances and metrics at any time when critical decisions need to be made. No one should have to wait days to get a detailed report.
• Work in the cloud. Aren’t you tired of having budgets in innumerable excel spreadsheets creatively labeled budget-final-version4-REAL_FINAL.xlsx?
• Backed up and secure finances that don’t rely on an employee carrying home an extra copy of the books on a USB stick just in case something happens.

The Quickbooks Drawbacks:

• We often see nonprofits use Quickbooks’ two-level class system to tag their expenses. Classes have some inherent problems:
• Classes are optional. It’s easy to forget to tag a transaction.
• Classes are unrelated. There’s no way to tie together “Donor Dinner 2012” to “Donor Dinner 2016” or that those events were for “Soup Kitchen Program” that became “Downtown Program”.
• Classes can’t be split by percentage. You can’t see how expenses relate or share donors.

Most bookkeepers favor the desktop version of Quickbooks, that has some inherent problems:

• In most versions, only one user can easily access the system at a time.
• It’s only as secure as the computer it runs on, and the lock on the office that computer is stored in.
• It Often isn’t backed up securely to an offsite location on a recurring basis. If your hard drive goes down, it can take your records with it!

While Quickbooks is often the first tool nonprofits turn to when managing their finances, that doesn’t mean it’s the right tool for the job. It’s important that your organization finds a system that can fit your needs as a nonprofit. Stay tuned part two of our series describing Fund Accounting and why it can solve many of your financial management woes.