Sizing Up NPO Software

Trying to adapt conventional accounting software to handle the books of a not-for-profit organization (NPO) is like struggling to fit a square peg in a round hole. While the two applications have much in common, their differences are so significant that without major customizing, for-profit software just can’t handle NPOs’ unique accounting needs.

As an aid to accountants who serve NPOs, this article examines the 10 most popular packages engineered specifically for them—itemizing their strengths and weaknesses.

The NPO accounting software should be able to handle, among other things, multiple self-balancing funds, encumbrance accounting and special reports to meet FASB and/or GASB requirements. (The numbers in red boxes that appear throughout this article are designed to guide readers to where a function mentioned in the text is assessed in the exhibits.)

When you begin examining products, you’ll probably find that you’ll have to make trade-offs when it comes to some software functions. For example, packages with very flexible account code structures are less likely to ship with built-in standard reports. On the other hand, such software will more likely include a friendly reporting tool to produce customized reports. As a result, expect to find the capability for standard reports among the low-end products and configurable reports in the high-end market. (For a definition of medium, low- and high-end products, see the sidebar, “Low End, High End? What’s the Difference?” below.)

Some of the components of NPO software that you should examine closely:

Audit trails. The ability to provide an audit trail, which is essential for any accounting software, varies greatly from one NPO product to another. While this review does not establish a requirement of any particular type of audit trail capability, it expects a product to be able to track certain pieces of information using whatever audit trail it has. For example, in addition to expecting the audit trail to show the posting date , it’s important that the software post transactions to the period specified in the entry and not the current period if out-of-period entries were allowed . Further, it’s expected that the audit trail reflect any changes made to entries and voided checks . And if the software allowed duplicate postings of invoice numbers, the system should be able to indicate this on the audit trail .

Controls. Because of their fiduciary responsibilities, NPOs and government entities in particular need effective controls. This includes passwords at different levels and various alerts and warnings. Some of the controls one expects to find include preventing the creation of duplicate identification numbers and postings as well as changes to posted data and existing codes . However, products that lack these controls are not necessarily inadequate. For example, a package with below-average controls, making the program easier to use, may include an excellent audit trail, which mitigates the poor controls.

Ease of use . While it’s hard, if not impossible, to strictly define what makes a program easy to use or friendly, the review established certain expectations. For instance, real-time posting is easier than a batch process because fewer user steps are involved and software was rated on that capability. Clearly, screens should be logical and intuitive to an accountant and their design should be consistent, speeding the learning process.

Reliability . This is a key issue. However, given only a day or two of experience with each package, judging stability became a game of chance to some extent. For example, a notoriously unstable product may have lucked out and not crashed during the brief period of investigation; likewise, a usually stable product may have locked up for some chance, unexplainable reason. Nevertheless, to be fair, the review reports all instances when a hot boot (Ctrl+Alt+ Delete) was needed to free a keyboard lockup or even when the computer had to be shut down and restarted.

Equally important is vendor reliability . Will the company be around next year or even 10 years from now to service the software and provide updates? Admittedly, this question is difficult to answer with assurance. However, when deciding on a vendor there are things to look for: the number of years the company has been in business and the number of software packages it has sold. Prudent customers also should ask to review a vendor’s financials, if they are available, and request a list of current customers. Current users can provide important observations on the quality of technical support.

Receivables . Accounts receivable and donor management are important functions of many NPOs’ accounting needs. Accounting for receivables can be handled in two ways: open item and balance forward. Open item works best when there are few transactions from any given individual and when the individuals pay specific invoices. Balance forward is best when there are many transactions and individuals pay portions or all of the balance outstanding. Credit card bills are an illustration of balance forward accounting. Most of these packages give the user the option to apply one or the other process. Some even allow the user to make this choice on a case-by-case basis.

Internet . Six of the 10 applications reviewed here can be operated directly on the Internet, with the vendors functioning as application service providers (ASP). The application—and usually the data, too—are maintained on the vendor’s remote computer and accessed by customers via the Internet. Thus, the customer no longer has to load the software or perform duties such as network and database administration.

Hyperlinks . A function that’s becoming more popular in accounting software is drill-down capability using hyperlinks, which allows a user to click on data to drill down to their source. All but two of the products provide some hyperlink capability. Two even go the extra mile, providing an easy way to add hyperlinks to custom reports.

Imaging . Another function growing in popularity is imaging, where the user scans a document (an invoice or a purchase order, for example) and then hyperlinks the data to the image, which is the original information source. Two products—Blackbaud and IFAS—have that capability built-in.

ODBC . If an accounting package has open database connectivity (ODBC), the software can be linked to a third-party add-on program—such as an Access database or an Excel spreadsheet. Eight of the 10 programs have ODBC functionality.

Schools/churches . Some packages are designed to handle the specific needs of schools and churches. As a result, they can perform accounting for student billing or church membership. Do not conclude, however, that packages without these specific modules cannot handle church or private school accounting. Although they generally cannot do the job directly out of the box, they may require only some programming adjustments.

Some of the applications also have special modules designed for fundraising, project/grant accounting, electronic funds transfer and direct deposit.

Customization . If your organization’s accounting needs are so special that you have to customize the software, two options are available: Either the vendor can alter the package for an additional charge, or the buyer can perform the customization if the vendor makes its source code (the underlying programming code) available. Customizing source code should be done only by an experienced programmer. Keep in mind, too, that if you modify the software the vendor may no longer be able to routinely update and maintain the product for you because the underlying code has been altered.

Pricing . Most of these vendors have complex pricing structures that make it difficult to compare products. Expect to pay extra for training, support, multiple users and implementation services. Also expect a monthly fee for ASP offerings rather than the fixed fee common with client/server arrangements. As an aid to comparing these vendors we have included the cost for a single-user implementation with general ledger, accounts payable and accounts receivable in exhibit 1. But even these prices are misleading because some vendors package extras, such as fundraising software, into their general ledger module.

For an overall assessment of functions, see exhibit 2. For information on what each package can do, see exhibit 3 , 3a and 3b . The tables provide side-by-side comparisons of each product, but most products have their own quirks, and these are discussed where material in the evaluations that follow.

And now, let’s look at each package.  

THE EVALUATIONS

Blackbaud, Inc.

Blackbaud

Blackbaud is a mid-level package that can handle both NPO and government accounting. It’s the undisputed market leader, with more packages in use than any other product evaluated here. Most of its users are NPOs. Contributing to its popularity are the available add-ons, including:

• Raiser’s Edge—which manages fundraising efforts.
• Academy—which handles accounting for private schools.
• Budget Management—which provides detailed budgeting.
• Grant & Endowment Management—which manages multiple grant and endowment efforts.
• Student Billing—which handles accounts for tuition, fees and bookstore transactions.

All required FASB Statement no. 117 and GASB reports are built into the software. Only one other product in this review—FundWare—has that feature. For customization, Blackbaud includes Crystal Reports. Like the high-end accounting software packages, Blackbaud assigns security at the account level—that is, you can restrict access to each general ledger account. Accounting periods can be locked to prevent accidental postings.

The product’s high functionality comes with a price: The software is not easy to use. Even the most experienced accountant will need extensive training, which isn’t helped by the poor indexing of its online documentation. For example, the index doesn’t list “encumbrance” or “encumbrance accounting.” Blackbaud offers training at its Charleston, South Carolina, headquarters and at several regional locations.

Navigating the program is cumbersome and not very intuitive. The program doesn’t even use its own menu system, but, instead, relies on the Windows operating system to access various functions. To move to a different function, you must click on Windows’ Start button and then click again on Programs , which evokes this screen:

Notice that eight Blackbaud functions are listed in the menu; clicking on any one evokes a group of sub-functions—total of 85. To add to the annoyance, subject areas aren’t logically designated. For example, what accountant would expect to find the general ledger report hidden under Miscellaneous Reports for the General Ledger modules—shown below?

New Generation Software, Inc.

Concert Series

This product can handle both NPO and government accounting for medium to large entities. Concert Series, which is Unix based, is extremely stable and available with either a graphic- or character-based interface. We used the character-based edition for this evaluation, and despite the fact that we needed three keys (+, Tab, Enter) to get through most input forms, maneuvering was easy—once you get used to this unusual arrangement. This is perhaps the software’s only weakness.

The product assigns four system-generated numbers to each transaction (system dates and times) for an excellent audit trail. To make viewing easy, users can opt to remove from the screens any unwanted forms or fields. The program can handle virtually any front-end system configured for the AS/400 (for example, SAP’s order-entry/purchasing system). Software training is offered on customers’ sites or at the vendor’s classrooms in Sacramento, California.

For entities with unusual accounting periods, Concert Series is a good choice. It allows any number of open periods and the periods can be kept open indefinitely. In addition, users can even specify periods of any length—a few days, several weeks, a few months even. The program can handle up to four budget amounts for each account and accounting period. General ledger data are downloadable to an Excel spreadsheet, with each part of the G/L account code structure exporting to a different column, which is very helpful for sorting data.

The vendor’s support staff includes accounting professionals with controller experience; thus, they understand accountants’ needs—an unusual marketing plus. New Generation has an Internet version, which was not evaluated.

Araize, Inc. Fast

Fund Nonprofit Software

FastFund is a low- to mid-level product that is easy to use—even for staff people who are not accountants—but only after you get past the initial account number setup. Not only is it confusing, but the wizard designed to help is not very friendly. As a practical matter, it probably pays to enlist Araize’s assistance with the initial setup. Once up and running, however, the program runs smoothly. Araize offers one-year, unlimited toll-free phone support.

FastFund automatically balances interfund transactions for the user. The auto-balance portion of a journal entry shows up only in the general ledger and not in the journals. Instead, an audit trail report shows the source transactions that created the due to/due from funds entries and a list of all due to/due from journal entries with references to the original source journals.

The program designer added a nice touch to formatted reports: Dollar signs are placed in their correct locations. That’s probably because Araize is headed by a CPA who understands the importance of proper presentation.

Those NPOs that need strong fundraising functions should consider FastFund. It ships with an integrated module called FastFund Raising, which handles campaign appeals, prospects and donor lists and pledge processing.

Because encumbrance accounting is not supported, the package is not suitable for government entities.

Araize is upgrading FastFund to a Windows environment.

Mirasoft, Inc.

ForFund/AEE

Mirasoft, Inc., offers three low- to mid-level products: ForFund NP, ForFund Gov. and ForFund/AEE. Only ForFund/AEE, which is accessed via the Internet, was evaluated; its functionality is equivalent to ForFund NP. This ASP version costs $500 for five users with a monthly fee of $100; the cost increases with the number of users and modules.

ForFund Gov, designed for government entities, handles utility billing and business licenses—a handy addition. Despite their names, ForFund NP and AEE can be used by both NPOs and government entities because they support encumbrance accounting.

ForFund was one of two low-end products evaluated that was programmed to notice when a duplicate invoice was posted in the accounts payable module (MIPs is the other). But the program offers a warning only; it will not prevent it. This is the way it works: The system checks for duplicate invoices across all vendors, which helps ensure that an invoice is not paid to the wrong vendor. In addition, the software forces a printout of a G/L distribution report prior to posting invoice data to the G/L or vendor files; that process provides the user with an audit trail.

The software has a bare-bones interface that appears deceptively easy. But because of design inconsistencies, the program is hard to use, so plan on budgeting extra for training. For example, some date fields require two digits for the year, others require four.

Mirasoft offers both hard copy and online documentation, but plans to drop paper editions. Many software publishers are moving in this direction because they can save money and ensure timely documentation.

Fund E-Z Development Corp.

Fund E-Z

Fund E-Z lived up to its name. It was by far the friendliest product to use. Speed buttons on the right side of the screen make accessing functions fast and easy.

The button labels are accountant-friendly. For example: CD (for cash disbursements), CR (for cash receipts) and GJ (for general journal). Better still, click on the CD speed button and jump immediately to the cash disbursements input screen.

This is a low- to mid-level product. It’s not suitable for government accounting because it lacks encumbrance accounting capability. Nor would it be a good choice for entities that require strong built-in controls because the price one pays for ease of use is virtually no built-in controls. There is, however, an effective audit report that automatically records any changes to posted journal entries, checks or invoices. As a result, Fund E-Z would be a good choice for those doing write-up work for small NPOs or for small- to mid-size NPOs with mitigating controls in place. Although training is offered, most users would not need it.

Fund E-Z also comes with a comprehensive fundraising module. The bank reconciliation is very complete and easy to use. Automatic fund balancing is a user option that’s easy to configure. All the standard FASB Statement no. 117 and many of the GASB reports are pre-defined for the user.

American Fundware, Inc.

FundWare 7

FundWare 7 is a mid-level product that is transitioning from DOS to Windows. Its producer, American Fundware, Inc., anticipates the full upgrade by yearend. The company also has an ASP offering, which was not evaluated.

The package contains an excellent audit trail. Although users can delete transaction reports, they can regenerate the same information at any time in standard journal report format so the data aren’t lost—a nice touch. In addition, the program assigns an auto control number to all transactions, and that number cannot be changed. If a journal entry is reversed, both the original entry and the reversing entry appear in the journal listing. Users can clearly identify the dollar impact of purchase orders and invoices on budgets and encumbrances. The product provides the best audit trail for encumbrances in this group.

All modules automatically create four-sided due to/due from entries. The software supports multiple charts of accounts, which by itself is not unusual, but the charts of accounts can have different account structures. The package contains a graphical report writer with pre-defined reports.

FundWare would be suitable for mid-size to large NPOs or government entities. It contains very strong budgeting and encumbrance functions and includes all required FASB Statement no. 117 and GASB reports. Blackbaud is the only other product in this review that also contains all required reports.

The company recently announced a high-end market product, FundWare 7 Enterprise Edition—a Microsoft SQL Server version. It wasn’t evaluated for this article.

FundWare reports are CPA-friendly: They even produce an occasional double-underline, but no dollar signs. To enhance training, the vendor offers CD-ROM teaching disks. The product comes with extensive and well-written documentation.  

Sungard-Bi-tech, Inc.

Integrated Financial and Administrative Solution (IFAS)

The IFAS product is suitable for medium and large NPOs and government entities. It competes with products such as PeopleSoft and SAP. Because of its size, it can handle large budgeting projects and complex “what if” work, particularly dealing with personnel.

Of special interest is the product’s imaging capability, which can be used in all its modules. When the cursor passes over something with an underlying source image, it changes to a camera, which indicates the user can drill down to the image. Whole Word and Excel files, as well as images, can be stored in the extensive database.

This software contains a wizard-driven reporting tool known as Click Drag and Drill that has the look and feel of Microsoft’s Access. This tool adds the imaging capability to user-created reports. This is the only product evaluated that allows users to create their own drill-down reports.

The account number setup is more complex than usual for this level of software, but it’s necessary to drive the functionality and reporting. As is the case with most high-end accounting software products with sophisticated functionality, users must make many decisions before they can implement the product, including complex business process reengineering processes. Sungard-Bi-tech will help by setting up the account code structure and converting the data.

However, with all this power, the software doesn’t appear to be very stable. During a demonstration by an IFAS staff person, the program locked up several times and had to be hot-booted to resume work.

Because it is complex, extensive training is necessary. Compared with the unusually friendly FundEasy, IFAS does not fare well because of its complexity but also because of design inconsistencies. For example, some input fields are case sensitive while others aren’t.

Sungard-Bi-tech offers two alternative products for smaller organizations; we did not review them. One, IFAS.Net, is an Internet product, and the other, Ready-Set-Go, is billed as software that can be implemented quickly and easily.

Micro Information Products, Inc. (MIPs)

Nonprofit Series

Nonprofit Series is a low- to mid-level package that was almost as easy to use as Fund E-Z, yet was more powerful.

Particularly good was its account code structure, which is table-driven and lets the user enter a transaction and select which fund, program or G/L account to attach it to. Most software would require the user to create a specific account during the setup. To add a new fund, it’s only necessary to create a code for it. Not only is the structure easy to set up and use but it provides a virtually unlimited number of accounts.

The software’s audit trail tracks changes that occur in the system as well as in transactions. This is unusual; most products track some changes to transactions but leave system changes up to third-party add-ons. Nonprofit Series also is the only vendor to routinely provide auditors with detailed information for accessing the Nonprofit Series database for substantive testing and internal control evaluation via its Auditor’s Guide.

Users pay a high price for this functionality. For example, most of the standard FASB and GASB reports need to be configured by the user, allowing for complete account number structure flexibility. While this is not unusual for this level of software, it’s technical feasible, and we would hope that the developers will put in the extra effort to provide that capability. Users also have to configure the due to/due from entries by fund and general ledger account to enable automatic fund balancing when interfund transactions are posted.

A small annoyance: Speed buttons, a fast way to access the program’s functions, were too small to be read easily and lacked explanatory balloons.

The company says it plans to release models for electronic funds transfer and direct deposit.  

Shelby Systems, Inc.

Shelby 2000 Financials

Shelby is a low- to mid-level product designed primarily for churches. As such, its membership module is especially powerful and its payroll module incorporates tax information for ministers.

Considering its relatively powerful accounting functions, the product is modestly priced, which makes marketing sense because its customer base, churches, is rarely affluent and staffed mostly by lower-paid bookkeepers rather than CPAs. However, accountants doing write-up work or offering payroll services to churches would do well to consider using Shelby.

The software’s training and documentation are clear and appear to be aimed at people with modest accounting skills.

Shelby 2000 Financials doesn’t automatically balance interfund transactions, nor will out-of-balance transactions post to the general ledger. Rather, an out-of-balance warning alerts users to provide their own balancing entries. The audit trail is excellent; it forces hard-copy printouts of journals before posting can occur.

The product offers two posting options. One is easy to use, but the other is very difficult—in part because it is a two-step process: One person posts a transaction in a subsidiary module (such as accounts receivable) and a second checks that transaction before doing a final posting into the general ledger; the two-step system apparently is designed for security and to reduce errors.

Shelby invites its users to suggest design revisions, and when they are accepted, it posts the upgrade patches on its Web site for easy download. The company also has an Internet version, which wasn’t evaluated.

Public-Sector.com, Inc.

USL Financials

USL Financials is a mid- to high-level product suitable for both NPOs and government entities. The Internet version was evaluated for this review, but the client/server version was not.

One of USL’s strengths is its ability to keep both funds and grants in balance—an unusual and useful feature. Another strength is its hyperlink dexterity. Users can add hyperlinks, in the form of yellow arrows, on most of the input forms. A right click on one of these arrows takes the user to the next logical step in a given process. Considering the complexity and functionality of this product, it’s relatively user friendly. Since setup is complex, USL’s staff does the initial setup, which includes requirements definition, data conversion and design of the chart of accounts.

Budgets can be set up at the account level or at the general account level (that is, control account level) allowing flexible budgetary control. USL allows up to five different versions of the budget to be attached to any account. The purchase order module “pre-encumbers” the budget automatically and the budget is subsequently encumbered in the accounts payable module.

The software can be defaulted to disallow budget overrides, which provides good control over purchasing. On the other hand, while the built-in controls are good, their implementation does create some problems. For example, once a journal entry has been posted it cannot be easily accessed or traced. The result: good control but a poor audit trail. The controls should prevent posting to improper dates, but when I tried to use an improper posting date in the review, I had to hot boot the system to continue work. There is no built-in fail-safe to handle forbidden transactions. Another weakness in the controls: Users can post duplicate cash receipts and disbursements, although the latter will provoke a warning.

A cautionary note: It was very difficult to get product and technical information from the vendor for this evaluation, which means customers may face the same problem.  

CONSIDER THE TRADE-OFFS

As you can see, none of these packages is perfect. Each one has good and bad features. But some of the features this review gives low marks to may not be critical to your software use. Likewise, highly rated features may not be important to you. Your needs should dictate which of these products you choose.

If you are doing write-up work for small NPOs, Fund E-Z might be a good choice, and for CPAs working with a church, Shelby may be the way to go. If high reliability is your concern, New Generations could be an excellent start. Sungard might be the option for strong imaging needs, but if you require built-in reports, Blackbaud or FundWare would be good selections. USL Financials and ForFund might be the place to start if you are interested in applications to run on the Internet. If your organization is growing and adding new funds and accounts on a regular basis, then MIPs’ table-driven account code structure is worth looking into. And if fundraising is a big issue, then consider starting with FastFund or Fund E-Z.

But whatever you do, before buying, run comprehensive evaluations. It is not good enough to trust the claims of a vendor. You must try the product, and it’s best to try it with data typical for your organization.