Fund Accounting Software for Nonprofits: A Complete Guide
Learn how fund accounting software helps nonprofits track restricted funds, grants, and stay compliant.
Fund Accounting Software for Nonprofits: A Complete Guide
Fund accounting is the backbone of nonprofit financial management. The right fund accounting software helps you track every dollar, ensure compliance, and build donor trust. In this guide, we'll explain what fund accounting is, why it matters, and how to choose the best software for your organization.
What Is Fund Accounting?
Fund accounting is a system of accounting used by nonprofits, governments, and other organizations to track resources according to their intended purpose. Unlike for-profit accounting, which focuses on profit and loss, fund accounting separates resources into categories (funds) to track restrictions and spending.
Types of Funds
- Unrestricted funds: Can be used for any purpose.
- Temporarily restricted funds: Donor-imposed restrictions that expire over time or when a purpose is fulfilled.
- Permanently restricted funds: Donor-imposed restrictions that never expire (e.g., endowments).
Why Fund Accounting Matters for Nonprofits
Nonprofits are accountable to donors, grantors, and regulators. Fund accounting ensures:
- Transparency: Donors see exactly how their gifts are used.
- Compliance: Meet grant requirements and regulatory standards.
- Audit readiness: Maintain clear records for audits and reviews.
- Trust: Build confidence with stakeholders through accurate reporting.
Key Benefits of Fund Accounting Software
1. Track Restricted, Unrestricted, and Temporarily Restricted Funds
Fund accounting software lets you tag and track every transaction by fund, ensuring you never accidentally spend restricted dollars on the wrong purpose.
2. Automate Grant Tracking and Reporting
Grants come with strict requirements. Fund accounting software automates tracking, deadline reminders, and compliance reporting—so you never miss a deliverable.
3. Simplify Audits and Compliance
With a clear audit trail and automated reconciliation, fund accounting software makes audit prep fast and painless.
4. Provide Donors with Clear Impact Reports
Show donors exactly how their gifts made a difference with fund-specific impact reports and dashboards.
Top Features to Consider in Fund Accounting Software
- Multi-fund support: Track unlimited funds with custom tags and categories.
- Integration with donation and CRM tools: Sync donor data and gifts automatically.
- Automated financial reporting: Generate FASB-compliant statements, fund reports, and dashboards.
- Grant management: Track grant budgets, spending, and compliance in one place.
- Bank reconciliation: Match transactions and reduce manual errors.
- User permissions: Control access by role to protect sensitive data.
Common Fund Accounting Challenges and Solutions
| Challenge | Software Solution |
|---|---|
| Mixing restricted and unrestricted funds | Automatic fund tagging and alerts |
| Grant compliance | Deadline reminders and compliance reports |
| Audit preparation | Automated audit trails and document storage |
| Donor reporting | Fund-specific impact reports |
How to Choose the Right Fund Accounting Software
- Assess your fund structure: How many funds do you manage? Do you need custom categories?
- Evaluate integration needs: Does the software connect with your CRM, donation platform, and payroll?
- Check compliance features: Look for FASB reporting, grant tracking, and audit readiness.
- Consider scalability: Choose a solution that grows with your organization.
- Request a demo: Test the software with your real-world workflows before committing.
Alignmint: Fund Accounting Made Easy
Alignmint's fund accounting module is designed for nonprofits of all sizes. Track every dollar, automate compliance, and build donor trust—all in one platform.
Ready to simplify your fund accounting? Join our waitlist