For non-profits, the ability to win and manage grants offers immense resources for your organization. So does grant accounting. To make the most of grant money, document your use thoroughly, and be able to keep gaining grants, your grant accounting software should be up to the task. Let’s look at good practices, as well as how grant accounting software is vital to your nonprofit financial management.
How does Grant Accounting Affect Nonprofits?
In short, a lot. As a nonprofit, your organization is beholden to the support of patrons and your internal initiatives to raise funds around your cause. But, of course, these don’t have to be the only sources of income. Grants are an essential source of additional funding because you do not need to pay it back and can use it to fill a specific financial need you have. With this grant money though, comes accounting responsibility. Here are some things you need to win a grant, maintain the financials, and position yourself for achieving more grants:
- Documented need of funds (project specifics necessitating financial support)
- Receipts, costs, estimates, and invoices that the grant money would go towards
- Justification for funds – why the cause matters
- Show previous success and strategies using funds to achieve goals
- Goals of the project, how the money will be used
- Timeline for funds
- Accomplishments resulting from grant funding
Besides utilizing strong grant writing skills, you’ll notice that accounting and finances go hand-in-hand with grant work. You need to justify your claim with actionable numbers to ensure that you are in financial need and that the grant money will be well spent. The more successful you are at using and documenting grants the more likely you are to keep winning grants. Grant accounting helps you manage the money once the grant is awarded and also lets you track the financials in a way to present the data to both investors and for future grants.
Grant Writing 101
Here are some basics for strong grant accounting.
Treat the Grant Almost Like a Legal Obligation
You have the money, now it’s time to put it towards where you said it would go and make it count as much as possible. Categorize the funds to be managed to the specific project or in the overall grant fund/ledger.
Track the Finances
Be able to monitor the spend of the grant money and be able to compare it to specific milestones of the project in question.
Maintaining financial reports and analysis is important on many levels. For one thing, this lets you track how the money is being used and how the project is progressing. Financial and management reporting can reveal operational effectiveness, roadblocks, cost issues, and ultimately, ways to improve processes to be more efficient and cost-effective. Without documenting the grant funds, you won’t know this.
Maintain Grant Requirements
Several grant rewards come with requirements attached. For example, the grant money can only be spent on certain items or for certain situations. They may have documentation requirements too. Be sure to plan for this in your financial management meeting. You don’t want to risk forfeiting the grant money or not being eligible for the grant again.
Keep Up-To-Date Finances
This is critical for both the application phase at the beginning of the grant process and also for tax reporting. As a nonprofit, your finances must be audit-ready. You need how you’re using grants, as well as the success rates and relevant finances of the whole organization. This is important for maintaining nonprofit status and also cementing credibility among grant awardees.
How can Grant Accounting Software Help?
Good grant accounting software can, and should, help you manage the grant finances throughout the entire process by:
- Helping you track and control the grant finances
- Creating real-time reports
- Automating data entry for accurate accounting
- Saving you and your team time managing the books
Like with any accounting software, your solution should be geared to address the specific requirements of nonprofit accounting. This saves you time and money (avoiding mistakes and saving time), while also giving you peace of mind that your accounting is accurate. The last thing you and your busy team want is to be scrambling to adjust grant debits and credits. Reliable grant accounting software literally puts time back in your hand while helping you manage a more efficient accounting lifecycle.
Avoid Spreadsheets for Grant Accounting
Some nonprofits start out by just using spreadsheets to track their grant information. This is not the best solution, especially when it comes to financial data. It’s simply too much data to track and update manually, costing time while leaving lots of room for human error as team members must manually input and update changes. Consolidating your nonprofits accounting in a single system is both efficient and an immense relief to busy staff. Automating the finances of the grant accounting ensures accuracy and lets you prioritize nonprofit work instead of managing the books!
“Accounting Seed has allowed us to act bigger than we are. There’s only four of us (at Devices for Students). We’re able to easily fund money to other nonprofits, and it’s easier to collaborate with other people than to use spreadsheets.”
Jay Pettigrew, Co-Founder, Devices for Students
Key Features For Grant Accounting
As you look to upgrade your accounting, there are some core features that are essential for grant accounting. Automation, financial reporting, and project accounting features will be central to managing your grant income. Let’s look at these features in detail:
Grant Management/Project Accounting
Like project accounting, Accounting Seed lets you track and organize grant amounts to see where you are in reaching target funding goals.
Track account details for specific initiatives throughout your organization to identify where donations are coming from and assess if target goals are within reach.
Automated Cash Receipt Management
Automatically record donations to the appropriate funds and programs with allocations into the general ledger.
Turnkey and Custom Financial Reporting
Document and analyze all of your grants to assess progress and financial health. Drill-down to specific account details to identify issues or analyze account profitability. Create unique reports relevant to your individual initiatives to always have real-time information.
Track incomes and payments within the same system as your account data to ensure accurate financial information.
Besides core accounting functions, flexibility is an essential element of grant accounting. The reality is that your individual nonprofit will function differently than any other. Your unique processes, grants, and funding resources make it that you’ll want to customize and configure how your accounting processes flow to maximize system usability. Otherwise, your staff will need to take extra steps and complete more manual work in order to conform to the system itself. Instead, your grant accounting software should conform to your requirements. This is Accounting Seed’s specialty.
Trusted Grant Accounting Software With Accounting Seed
Accounting Seed gives you complete control over the financial management lifecycle while letting you view financial data in real-time to make key decisions. Accounting Seed is also integrated into the Salesforce Nonprofit Success Pack (NPSP). Our sophisticated, multidimensional reporting dashboard lets you aggregate transactions and activities across your nonprofit organization:
- Multiple organizations
- Multiple donors or grants
- Multiple locations
Our customizable, click-no code-reporting and dashboards allow you to view and monitor grant funds with real-time analytics. Accounting Seed maximizes your accounting’s accuracy and efficiency to give you the data and support your need to maximize your nonprofit’s performance. That’s why we are trusted by several nonprofits. See what they have to say about us on our Salesforce AppExchange listing and the various customer stories on our site!
Ready to make grant accounting a breeze? Schedule your personalized demo today!
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