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What is Non-Profit Accounting Software?

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  • Written By: Daphne Mallory
  • Edited By: Melissa Wiley
  • Last Modified Date: 14 September 2016
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Non-profit accounting software refers to web-based or desktop software that non-profit organizations can use to manage their financial affairs. Some of the functions include the ability to record and track donations, pay bills, and generate balance sheets and other financial reports. There are a few software programs that allow a non-profit to process debit card transactions without the need for additional equipment. Companies often offer different software according to the number of users as well as whether it will be used in multiple locations. For example, if the software is web-based, then the non-profit can purchase licenses for each user.

The accounting aspects of managing non-profit organizations are critical for legal and tax purposes. The collection of public donations and contributions at a certain level are often subject to regional and national laws. Accurate record keeping is often essential in case there’s an audit from a government tax revenue agency to prove that the accounting is done properly and in accordance with the applicable laws. Non-profit accounting software simplifies the task of record keeping and can be the organization’s best chance of keeping an accurate and complete financial accounting of all transactions. It’s the reason why non-profit organizations often choose to use it rather than use spreadsheets or paper.

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A key function of some non-profit accounting software is payroll management. Employees of the organization receive a paycheck on a regular basis, and the accounting that is required to produce a finalized and accurate paycheck that complies with tax laws can be extensive. For example, non-profit organizations may be required to retain certain portions of the paycheck for regional and state taxes and pay group health plans and other benefits. The software can be used to process payroll faster and often more accurately than doing the calculations for each paycheck manually. It’s often possible to file the necessary tax report forms using the same software, and paying a one-time fee for the software or monthly license fee is often cheaper than hiring a tax professional or payroll service to complete the same tasks.

Managing the finances related to fundraising activities can sometimes be overwhelming to individuals tasked with handling it on behalf of the non-profit organization. Non-profit accounting software can streamline the process of planning a fundraiser as well as set up the expense and donation accounts needed to process the transactions. Some software also integrates with the web to receive contributions and automatically input it into the software.

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