We often get asked, by growing companies, whether or not their nonprofit has outgrown their accounting software – most notably QuickBooks. Let us preface this by saying when we get asked this, the honest answer is—it depends.
It depends on your company size and how quickly your company is growing. It also depends on the complexity of your funding sources. We know migrating to new accounting software can be overwhelming, which is why we’ve written Stepping Up to New Accounting Software – How It Really Works. Note: NFP Partners are experts in QuickBooks and we service plenty of clients on this platform. But, it does have its limitations.
How to know if your nonprofit has outgrown QuickBooks:
1. You are consistently having to use other programs (most often Excel) to build reports.
This is probably the number one reason nonprofits realize they have outgrown QuickBooks or their accounting software. Intuit works at providing better reporting options within QuickBooks Online, but it still does not meet all the reporting needs. This means they miss the bigger picture needed for effective planning in organizations. If you are on the edge about this one, consider reading Accounting Software Questions For Your Nonprofit to Ask.
2. Your company has multiple funding sources.
QuickBooks has serious limitations around its capabilities to handle a growing organization with multiple funding sources, thus a need for fund accounting. You probably have outgrown your nonprofit accounting software, and will want to convert to a more robust one, if your company gets funding from multiple funding sources (e.g. Federal, state, local or private funds). Tracking expenses for grant reporting become a major factor in your organization’s ability to timely report and bill to funders. It also helps obtain transparency to compete for grants.
3. You’re worried your internal controls may not be up to par.
If you are wanting to mitigate your risk against audit or fraud, QuickBooks Online might not be the right choice for you. Intuit still has not provided a way for users to back up their data or to restore their files if something gets corrupted.
This is a huge risk for inexperienced QBO users who may have a higher likelihood of accidentally corrupting or deleting transactions. QBO also has great capability to track user changes to monitor for separation of duties as well as fraud if required.
4. Everything takes longer than it should
You may have outgrown your accounting software if the following takes longer than it should.
- Entering transactions
- Creating bills
- Pulling reports
- Data entry, etc.
If you are finding everything you do, related to your books, takes a significant chunk out of your day, it’s probably time to move to a more robust system. Your organization may consider A Look at ACOM Solutions or A Look at Microix Requisition. For additional reviews, read A Deeper Dive Into Nonprofit AP Automation Series Articles.
5. You spend way too much time reconciling and balancing books.
If you need more control tracking transactions, you have outgrown QuickBooks. While the software offers double-entry accounting, it has weak audit trail capabilities. This lack of accounting entry validation leads to potential compliance challenges with tax filings and regulation reporting.
6. You are unable to cross fiscal years for reporting needs.
Most organizations do not have the same fiscal year. Grant reporting becomes especially burdensome when you are unable to report the correct expenses and revenue for the grantors mandated period of performance. Combining two fiscal years to make one consolidated grant report becomes overly manual and time-consuming, not to mention, frustrating.
In addition, it increases the risk of not capturing all of the expenses related to the grant. Thus, your grant billing will be understated and your agency might not be reimbursed for all of the allowable expenses related to the program.
7. Month-End Closeouts Take Too Long
You’re struggling with multiple funds, programs or locations and record keeping is inconsistent or missing completely. You require automated workflows and centralized document management so month-end close-outs can take hours instead of weeks.
8. Overhead Is Excessively Costly
You have a clunky legacy system incurring unnecessary costs. Your staff spends an unnecessary amount of time on an ineffective system to which they could be working on their “real jobs.” Not to mention, the mounting frustration the bumbling system is causing your staff which leads to further loss of productivity.
The cost of paying for customization or constantly upgrading or patching your accounting system to keep it limping along cuts into your operational budget.
9. You Are Not GAAP Compliant
Undocumented changes can be made to your current accounting system, which is a hurdle when it comes to auditing. You may need ERP software that has controls implemented for nonprofit organizations.
Many customers have outgrown their entry-level accounting software and have turned to a specialized accounting software system to support the next phase of their business. Rip off the Band-Aids and implement a solution that will help you achieve your financial goals.
If you are asking these questions already, it’s likely your organization has outgrown your current software. We invite you to contact us to learn more about our solutions for small and mid-sized businesses and receive a free accounting software assessment. It’s easier and more affordable than you might think. You can also visit our Ultimate Guide to Outsourced Nonprofit Accounting to learn more.