Ultimate Guide to Selecting the Best Accounting Software for Nonprofits

Choosing the right accounting software for nonprofits is important for the success of your organization. Some factors to consider include budget, accounting needs, user-friendliness, and integrations with other tools. When selecting nonprofit accounting software, compliance should be a top priority. Be sure the software you choose meets nonprofit requirements such as financial reporting standards, grant tracking, and donor management.

With so many options on the market, choosing the right accounting software can be overwhelming.

In this guide, we’ll break down the top key factors for picking the right nonprofit accounting software package to meet your unique nonprofit needs.

So let’s get started!

Topics in this Guide

How this connects to your accounting and reporting

• Nonprofit Accounting Guide
• Fund Accounting Guide
• Financial Reporting Guide
• Donation Management Guide

What is accounting software for nonprofits?

Nonprofit accounting software is specifically designed for the unique needs of nonprofit organizations. It makes it simple for them to do accounting the right way. Unlike general accounting software that focuses on the amount of profit made, it is designed to handle project-focused accounting. This includes features such as accepting donations and presenting figures in a transparent way to donors and board members. It also offers nonprofit-specific accounting functionality such as the ability to receive donations, manage restricted funds and prepare Form 990. This software is different from for-profit accounting software like Quickbooks because it is designed specifically for nonprofits.

Additionally, using nonprofit accounting software can make preparing for audits much easier, so you always know the financial health of your organization. Let’s look at some of the other key benefits of integrating the best nonprofit accounting software into your organization’s infrastructure.

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What are the key features and benefits of using accounting software for nonprofits?

Accounting software for nonprofits provides a number of benefits, such as the ability to track revenue and expenses, manage budgets, and generate financial reports. More importantly, this type of software can help nonprofits to operate more efficiently and effectively.

There are many benefits of using accounting software for nonprofits, including:

• Improved accuracy and efficiency in financial reporting
• The ability to track revenue and expenses easily
• A better understanding of where funds are being spent
• Greater transparency and accountability to donors and the public

Additionally, nonprofit accounting software can help streamline operations and reduce the amount of time needed to complete financial tasks.

True Fund Accounting Software

True fund accounting software is an accounting system specifically designed for non-profits to track funds, programs, grants, and projects. Fund accounting is different from traditional accounting in that it tracks multiple funds and accounts for the unique needs of charitable organizations. This type of software allows non-profits to separate their finances into distinct funds and accounts in order to accurately track and manage spending.

For non-profits looking for non profit accounting software, make sure it includes a true fund accounting tool. This provides organizations with an efficient and accurate way to track and manage their finances, as well as powerful reporting tools to demonstrate accountability and monitor progress. With features such as automatic backups, crash protection, and audit trails, true fund accounting software provides organizations with a secure and reliable way to manage their finances.

Organized and Customizable Compliant Nonprofit Reports

Nonprofit accounting software provides an organized approach to bookkeeping and nonprofit reports that should be familiar to most accountants. This means you can easily access all pertinent information regarding donations, expenses, and other transactions in one place. You also have the ability to create detailed donations reports in order to better understand your organization’s financial position at any given time. This makes it easier to generate compliant reports for the financial accounting standards board (FASB) and an audit.

Improved Donor Relationships with Donor Management Software

Another great benefit of nonprofit accounting software is that it makes it easy to build relationships with donors with donor management software. You can use the software to track donations from individual donors over time and create personalized thank-you letters for them as well as tax receipts for their records. Furthermore, many programs allow you to customize emails and send out updates about projects or upcoming events in order to keep your donors informed about the progress of your organization’s activities.

Streamlined Compliance Requirements

Accounting software for nonprofits makes it easier to satisfy compliance requirements set by government agencies such as the Internal Revenue Service (IRS) and FASB. With this financial management solution, you can easily track donations made by individuals or businesses and generate reports that meet IRS standards without having to manually enter data into multiple spreadsheets or systems. This will save you countless hours of work when submitting paperwork for audits or filing taxes each year!

Enhanced Visibility into Finances

Using nonprofit accounting software enhances visibility into finances by allowing organizations to track their financial health and compare their budget to their actual accounting. Additionally, these software programs enable users to generate both standard and custom reports to show how contributed funds are being used, as well as track funds, grants, and special programs. The software also provides real-time dashboards to display financial information, making it easier to make data-driven decisions to achieve the organization’s mission. These insights allow nonprofits to more easily monitor their financial performance against their budget, assess program effectiveness, and gain a better understanding of where money is being spent. Ultimately, this enhanced visibility into finances helps nonprofits make more informed decisions and better serve their mission.

Make More Informed Strategical Decisions

Using nonprofit accounting software can help make more informed strategical decisions by providing more timely, insightful financial reporting. It can allow for automatic reports to be created and emailed to teams, with dashboards to display important financial information side-by-side with outcomes, helping to demonstrate how well an organization achieves its mission more effectively than traditional financial reports alone. This can give organizations the visibility and control needed to make smart decisions, as well as the ability to slice and dice their financial reporting to see the exact data they need across their funds, departments, projects, and locations.

Mange and Track Donations

Using nonprofit accounting software helps increase the ability to manage and track donations by providing powerful donor management capabilities, as well as tools for tracking restricted funds. Donation tracking software is also included, allowing users to access donation reports on any device. Furthermore, donations given online are tracked by donor and purpose with minimal effort, and invoices sent to donors for the amount they have pledged show up automatically in the books. Lastly, nonprofit accounting software provides reports which give insights into giving such as pledge tracking, donations by donor, lapsed donors, or other giving reports. As a result, nonprofits can have a complete system for donation tracking, creating a safer and more efficient way to manage donations.

Improved Financial and Reporting Automation

• Build custom financial reports by project, campaign, or department, simply and effectively.
• Create Form 990 Reports, Fixed Asset Tracking, Income and Expense Allocations.
• Create automated, paperless workflows to accelerate routine accounting and report tasks, leaving more time to focus on strategies to fulfill your mission.
• Automate fund, grant, revenue and billing processes.

Improved Budget and Expense Tracking

Using nonprofit accounting software can greatly improve budget and expense tracking capabilities by providing robust budgeting capabilities, unlimited tracking characteristics for in-depth reporting, and the ability to easily track funds, such as grants and special programs using functional accounting. This helps organizations comply with the financial reporting requirements for restricted gifts.

With real-time tracking of budgets by programs or funds and donor management, grant management, financial reporting, bank reconciliations, and more, nonprofits can track their financial health by comparing their budget to their actual accounting. By leveraging this software, users can build custom financial reports by project, campaign, or department, tracking funds such as grants and special programs, and compare budgets to actual accounting.

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Key Advantages Using Non Profit Accounting Software

1. Automation – Accounting software automates the process of recording, reporting, and analyzing financial activities so you can focus on other priorities within your organization. This automation also ensures accuracy in all the data that is collected and stored. Having up-to-date financial information at hand will make it easier for you to make sound decisions about the future of your organization based on reliable data. 

2. Cost Savings – Accounting software saves time and money as it eliminates the need to hire additional staff or outsource services to manage your finances. It also eliminates the need for manual processes such as paper filing systems. This allows you to maximize your budget and put those resources towards other needs within your organization. 

3. Increased Efficiency – Using nonprofit accounting software can increase efficiency by streamlining all financial processes into one easy-to-use system. You no longer have to worry about manually entering data into multiple spreadsheets or manually managing accounts receivable/payable documents since the software does it all automatically with minimal effort on your part. Additionally, having accurate financial information at hand will enable you to make informed decisions about how best to use resources within your organization for maximum impact and growth potential over time. 

4. Security – Accounting software offers increased security over traditional methods because all data is stored on secure servers that are regularly monitored and updated with the latest security protocols in place to prevent unauthorized access or tampering of data within the system. 

Key Features in Nonprofit Accounting Software

Accounting Budgeting 

Nonprofit organizations need powerful budgeting software to help them track income, expenses, and financial goals. Look for a nonprofit accounting solution that allows easy creation of budgets, forecasts, and reporting. It should also provide real-time reports on your spending activity so you can more easily identify upcoming challenges.

Grant Management

Many nonprofits receive grants from charitable foundations or government agencies to support their programs. A good grant management system will enable your organization to efficiently review grant requests, make payments and track grant activities throughout the life cycle of the grant. It should also offer tight integration with general ledger modules so that data flows seamlessly between systems.

Reporting

A comprehensive reporting system should be a must-have feature when selecting nonprofit accounting software. The ability to generate accurate financial statements on demand is critical in order to stay compliant with regulations, as well as respond quickly if audited by donors or other regulatory agencies. Look for robust reporting capabilities, such as real-time access to all financial transactions within your accounts payable/receivable modules, plus detailed management reports with drill down capabilities that allow you to gain insights into resource utilization and cost metrics over time.

Audit Trail

Choosing the right nonprofit accounting software can be a daunting task. An important feature to consider is an audit trail as it can help streamline the process. An audit trail provides a comprehensive, secure way to track every financial transaction within an organization. This level of detail can help a nonprofit organization gain greater insight into their finances and understand the impact their decisions have on their financial health. With an audit trail, a nonprofit organization can quickly identify any discrepancies and make adjustments accordingly. Additionally, an audit trail can provide an extra layer of security by providing an accurate record of all financial transactions and helping to guard against fraud. For these reasons, an audit trail is an important feature to consider when selecting nonprofit accounting software.

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What to look for when comparing nonprofit software systems

Feature Comparison: Araize FastFund Accounting and QuickBooks Online

Features	FastFund Accounting	Quickbooks Online
Fund Accounting	Yes	No
Chart of Accounts Segments	6	1
Bank Reconciliation	Yes	Yes
Journal Entries	Yes	Yes
Nonprofit Reporting	Yes	No
Manage Contributions and Donations	Yes	No
Integration with Online Donations	Yes	No
Recurring Transactions	Yes	Yes
Gifts Splits	Yes	No
Contribution Statements	Yes	No
Direct and Indirect Allocations	Yes	No
Tax Support (for 1099s and 990s)	Yes	Yes
Balance Sheets by Fund	Yes	No
Income Statements by Fund	Yes	No
Form 990 Reports by Functional Area	Yes	No
Grant Reporting	Yes	No
Invoices and Payment Tracking	Yes	Yes
Functional Accounting	Yes	No
Cost Allocations	Yes	No
Pledge Tracking	Yes	Yes
Budgeting by Functional Area	Yes	No
Free Trial	Yes	No

Feature Comparison: Araize FastFund Accounting and Aplos Nonprofit Accounting Software

Features	FastFund Accounting	Aplos Accounting
Fund Accounting	Yes	Yes
Chart of Accounts Segments	6	2
Bank Reconciliation	Yes	Yes
Journal Entries	Yes	Yes
Reporting	Yes	Yes
Manage Contributions and Donations	Yes	Yes
Customizable Donations Page	Yes	Yes
Recurring Donations	Yes	Yes
Gifts Splits	Yes	Yes
Contribution Statements	Yes	Yes
Indirect Allocations	Yes	No
Tax Support (for 1099s and 990s)	Yes	Yes
Balance Sheets by Fund	Yes	No
Income Statements by Fund	Yes	Yes
Form 990 Reports by Functional Area	Yes	No
Grant Reporting	Yes	No
Invoices and Payment Tracking	Yes	Yes
Recurring Transactions and Donations	Yes	Yes
Functional Accounting	Yes	No
Pledge Tracking	Yes	Yes
Budgeting by Functional Area	Yes	No
Free Trial	Yes	Yes

Nonprofit Accounting Software Checklist

Budget 

The first and foremost thing to consider when choosing accounting software is your budget. Nonprofit organizations often have limited resources, so it’s important to find a solution that fits within your budget. While many software options offer a free or low-cost version, they may not include all the features you need. On the other hand, more expensive options may offer more advanced features, but they may not be necessary for your organization.

Features

Before making a decision, it’s important to evaluate the features of different software options and determine which ones are necessary for your organization. Some features to consider include:

Accounting and financial reporting: This includes basic accounting functions such as accounts payable and receivable, general ledger, and financial reporting.

Fund accounting: This feature is particularly important for nonprofits as it allows you to track and report on funds separately, ensuring compliance with regulations.

Donor management: If your nonprofit relies on donations, look for a software option that includes donor management features such as tracking donations, generating donation receipts, and donor analytics.

Grant management: If your organization receives grants, look for a software option that includes grant management features such as tracking grant applications and reporting on grant funds.

Define your core requirements 

As a nonprofit, your financial management system must incorporate data from different sources, including donor management, payroll and client management. It is important to define the functional requirements that you will need, especially the new system’s ability to support your organization’s unique chart of accounts and reporting requirements and provide valuable information to management.

Define your technical requirements

The next step is determining the delivery method for your new system: on-premise, hosted or cloud-based. With an on-premise installation you will be responsible for installing, maintaining and upgrading your system on your computers, along with backing up of your data, which will incur extra expenses for IT consulting. With a hosted solution, you are connected to outside servers that house traditional Windows based applications that typically don’t have access to new data sharing capabilities using APIs. A cloud solution does not require any software to be installed on your computers and all updates, upgrades and backups are all handled by the vendor. Plus, a cloud solution allows you to access your programs and data anywhere, on any device that has an internet connection.

Ease of use 

Another important factor to consider is the ease of use of the software. You’ll want to choose a solution that is user-friendly, easy to navigate, and easy to train staff and volunteers on.

Integration 

Consider if the software you choose can integrate with other tools and systems your organization uses. This can help streamline processes and improve efficiency.

Support 

It’s important to choose a software option that offers robust support, including online resources, training materials, and a dedicated support team. Make sure to research the level of support offered by different software options before making a decision.

Scalability 

Consider the scalability of the software you choose. As your organization grows, you’ll need a software option that can grow with you and adapt to your changing needs.

Security 

Choose a software option that prioritizes security, with features such as data encryption, password protection, and regular software updates to protect your organization’s sensitive information.

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Bottom Line

Accounting is an essential element of running a successful nonprofit organization as fiscally responsible nonprofits are more likely to receive donations from individuals, foundations, and government agencies than those that are not well managed financially speaking. Every nonprofit that craves growth and sustainability should diligently record, report, and analyze its financial activities for optimal performance; one great way to do this is by putting in place accounting software that aligns with its needs in order to maximize its budget while ensuring accuracy in all its data collection processes too! With non profit accounting software, nonprofits can enjoy cost savings, increased efficiency, automation capabilities and security features which will help them reach their goals faster than ever before!

Choosing the right accounting software for your nonprofit organization is an important decision. By considering your budget, evaluating the features you need, and assessing the ease of use, integration, support, scalability, and security of different options, you can make an informed decision that will serve your organization well for years to come.

When you are ready to make the change to new accounting software, check out Araize’s FastFund Accounting. FastFund is the only cloud-based software as a service that seamlessly integrates nonprofit fund accounting, fundraising CRM and payroll in a single system. Schedule your Free Nonprofit Accounting Consultation for insights into compliance and a simple approach to nonprofit accounting.

Frequently Asked Questions (FAQs)

What makes nonprofit accounting software different from regular accounting software?

Short answer: It’s designed for fund accounting, not profit accounting.

Expanded answer: Unlike commercial accounting systems, nonprofit accounting software tracks multiple funds, programs, and grants. It ensures every dollar is used as intended — whether restricted or unrestricted — and produces nonprofit-specific financial statements like the Statement of Activities and the Statement of Functional Expenses.

Why should nonprofits use fund accounting?

Short answer: To maintain accountability and transparency.

Expanded answer: Fund accounting separates financial activity by purpose — for example, general operations, grants, restricted donations, and programs. This lets nonprofits prove to donors, boards, and auditors that money is being spent the way it was promised. It’s also critical for IRS and audit compliance.

Can QuickBooks be used for nonprofits?

Short answer: It can, but with limitations.

Expanded answer: QuickBooks was built for for-profit businesses, not mission-driven organizations. Many nonprofits end up using manual workarounds — like classes, tags, or spreadsheets — to track grants, restricted funds, or programs. That increases the risk of errors and makes reporting painful. Nonprofit-specific systems like FastFund Accounting are built to handle true fund, grant, and program tracking without hacks.

What are the key features to look for in nonprofit accounting software?

Short answer: Fund accounting, reporting, and integrations.

Expanded answer: Core features should include true fund accounting, donor and grant tracking, budget vs. actual reporting, audit trails, and cloud access. You should also look for integrations with donor management, payroll, and banking. These integrations reduce duplicate data entry and improve accuracy across finance and development.

How does nonprofit accounting software help improve donor relations?

Short answer: By linking donations directly to financial activity.

Expanded answer: When your accounting software connects with donor management, you can track pledges, gifts, tribute donations, and grant income in one place. You can automatically generate thank-you letters and tax receipts, analyze donor trends, and show the financial impact of giving. This level of transparency helps you retain donors and grow long-term support.

What are the advantages of using cloud-based nonprofit accounting software?

Short answer: Access anywhere, automatic backups, and lower IT overhead.

Expanded answer: Cloud systems let staff and board members securely access real-time financial data from any location. Updates, backups, and maintenance are handled by the provider, so you don’t need an internal IT team. Cloud delivery also supports remote teams, multi-site programs, and auditors who need temporary access.

Is nonprofit accounting software expensive?

Short answer: Not if you choose the right fit for your size and needs.

Expanded answer: Many nonprofit accounting platforms offer tiered pricing and nonprofit discounts. Cloud-based systems also eliminate the hidden costs of servers, manual backups, and version upgrades. The most cost-effective approach is to start with only the modules you actually need — for example, accounting only, or accounting + fundraising + payroll.

How does nonprofit accounting software simplify audits and compliance?

Short answer: It keeps a complete audit trail for every transaction.

Expanded answer: A nonprofit-focused system records who did what, when, and why — including edits and approvals. That audit trail reduces fraud risk and speeds up annual audits. Many systems can also generate GAAP-compliant statements and the financial sections you need for IRS Form 990 and grantor reporting.

Can small nonprofits benefit from specialized accounting software?

Short answer: Absolutely — you don’t need to be a large nonprofit to justify it.

Expanded answer: Smaller nonprofits still have to track restricted funds, grants, and program expenses. Spreadsheets and generic tools can hide problems until it’s too late. A nonprofit-ready platform gives even small teams clean books, audit-ready records, and professional reporting for boards and funders. Solutions like FastFund Online are designed to scale with you as you grow.

How does nonprofit accounting software support budgeting and forecasting?

Short answer: It compares real-time actuals against your budget by fund, program, or grant.

Expanded answer: You can build detailed budgets for each grant, program, department, campaign, or funding source — then monitor how you’re tracking against those budgets throughout the year. This makes it easier to adjust spending, make strategic decisions, and answer board questions with current numbers instead of guesswork.

What integrations should nonprofits look for?

Short answer: Donor management, payroll, and bank feeds.

Expanded answer: The ideal accounting system plays nicely with your donor CRM, payroll system, and bank. Donor integration lets you sync contributions and pledges directly into the ledger. Payroll integration helps you allocate salaries and benefits across programs. Bank integration speeds up reconciliation and improves accuracy.

How does nonprofit accounting software improve transparency with boards and donors?

Short answer: It delivers clear, real-time financial reports.

Expanded answer: Good systems generate dashboards and statements broken out by fund, program, campaign, or grant. You can quickly show exactly how restricted money was spent and how much remains. That level of clarity builds donor confidence and helps your board govern responsibly.

How can a nonprofit tell it’s time to upgrade its accounting system?

Short answer: When you’re relying on spreadsheets and workarounds to get basic answers.

Expanded answer: Warning signs include: you can’t easily report by grant or fund, your auditor keeps asking for backup you can’t pull, your system doesn’t support restricted vs. unrestricted funds, or it takes hours to prepare board reports. If you’re patching holes instead of managing confidently, it’s time to move to true nonprofit accounting software.

What security features protect nonprofit financial and donor data?

Short answer: Encryption, controlled access, and regular backups.

Expanded answer: Reputable systems use secure cloud hosting, SSL/TLS encryption, daily or continuous backups, and role-based permissions so users only see what they’re allowed to see. This protects sensitive financial data, donor information, payroll details, and grant records from both external threats and internal misuse.

How can FastFund Accounting help nonprofits specifically?

Short answer: It unifies accounting, fundraising, and payroll in one platform built for nonprofits.

Expanded answer: FastFund Online provides true fund accounting, donor management, and payroll designed exclusively for nonprofits. You get grant tracking, budget vs. actuals, audit-ready reports, donor receipts, and board-friendly dashboards — all in one integrated system. That means less manual work, cleaner books, and more time to focus on your mission instead of chasing spreadsheets.

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