What is fund accounting software?

Fund accounting software is a specialized accounting system designed for nonprofits, governments, and other organizations that need to track resources by purpose rather than profit. It separates your finances into funds — each with its own restrictions, budgets, and reporting — so you always know exactly how donor and grant dollars are being used.

Why can't nonprofits just use QuickBooks?

QuickBooks is built for businesses that track profit and loss. Nonprofits need to track stewardship — how resources are used according to donor intent. QuickBooks uses 'classes' to approximate fund tracking, but it can't generate a Statement of Functional Expenses, track restricted fund balances in real time, or handle inter-fund transfers properly. Purpose-built fund accounting software handles all of this natively.

What's the difference between fund accounting and regular accounting?

Regular (for-profit) accounting focuses on one bottom line: net income. Fund accounting tracks multiple 'bottom lines' — one for each fund. Every transaction is tagged to a specific fund, and the system tracks whether those funds are restricted or unrestricted. This ensures donor-restricted dollars are never spent on the wrong purpose.

How much does fund accounting software cost?

Prices range from free (Alignmint Starter, for nonprofits up to $100K in annual donations) to $59-159/month (Aplos) to $500-2,000+/month (Blackbaud Financial Edge). The real cost comparison should include CRM, email, and event tools if the accounting platform doesn't include them.

Fund Accounting Software for Nonprofits: A Complete Guide

Fund accounting software is a specialized accounting system that tracks every dollar by its intended purpose — separating restricted funds, unrestricted funds, and grants into distinct accounts with their own balances and reporting. The top options for nonprofits in 2026 are Alignmint (free tier, all-in-one with CRM), Aplos ($59-159/mo), and Blackbaud Financial Edge ($500-2,000+/mo, enterprise). Unlike QuickBooks "classes," true fund accounting software enforces restrictions, tracks real-time fund balances, handles inter-fund transfers, and generates FASB-compliant financial statements automatically.

This guide covers what fund accounting is, why generic accounting tools fall short, what to look for in software, and how the leading platforms compare.

What Is Fund Accounting?

Fund accounting is the accounting methodology used by nonprofits, governments, churches, and other mission-driven organizations. Instead of tracking profit and loss (like a business), fund accounting tracks stewardship — how resources are used according to their intended purpose.

Every dollar that enters your organization is assigned to a fund. Each fund has its own restrictions, budget, and reporting requirements. The system ensures that restricted dollars are never accidentally spent on the wrong purpose.

The Two Net Asset Categories

Under current FASB standards, nonprofits classify net assets into two categories:

Without donor restrictions — Funds available for any purpose. This includes general operating revenue, unrestricted donations, and earned income.
With donor restrictions — Funds that donors have restricted for a specific purpose (like a building campaign) or time period (like a pledge payable over three years). These restrictions are legally binding.

Your fund accounting software needs to track both categories automatically and generate financial statements that show the distinction clearly.

Common Fund Types

Most nonprofits manage several funds simultaneously:

Fund	Type	Example
General Operating	Unrestricted	Day-to-day expenses, salaries, rent
Building Fund	Restricted	Capital campaign for new facility
Scholarship Fund	Restricted	Student financial aid
Endowment	Permanently restricted	Investment principal that can never be spent
Grant Fund	Restricted	Federal or foundation grant with specific budget
Program Fund	Restricted	Youth program, food pantry, etc.
Special Events	Unrestricted	Gala revenue and expenses

The more funds you manage, the more you need software that handles them natively — not with workarounds.

Why QuickBooks Isn't Enough

QuickBooks is the most popular small business accounting software. Many nonprofits start with it because it's familiar and affordable. But QuickBooks was built for businesses, not nonprofits — and the gaps become painful as you grow.

Here's where QuickBooks falls short:

Requirement	QuickBooks	True Fund Accounting Software
Restricted fund tracking	Classes (manual, error-prone)	Native fund tagging with real-time balances
Statement of Functional Expenses	Not available	Automatic generation
Form 990 data preparation	Not available	Pre-built chart of accounts mapped to 990
Inter-fund transfers	Manual journal entries	Built-in transfer workflows
Grant budget tracking	Not available	Budget vs. actual by grant
Net asset classification	Manual	Automatic
Donor integration	Separate system	Built-in or integrated

If you're managing more than two or three funds, or if you receive any grants with reporting requirements, you've likely already felt these limitations. Learn more about why QuickBooks isn't enough for nonprofits.

Want to see this in action? Schedule Your Free Setup — we'll walk you through it.

Key Features to Look For

1. Real-Time Fund Balances

You should be able to see the current balance of every fund at a glance — not after running a report and waiting. When your board asks "how much is left in the building fund?" the answer should take 5 seconds, not 5 hours.

2. Automatic Net Asset Classification

Every transaction should be automatically classified as with or without donor restrictions based on the fund it's assigned to. Manual classification is where errors happen.

3. Pre-Built Chart of Accounts

A nonprofit chart of accounts is fundamentally different from a business one. Look for software with a pre-built chart of accounts mapped to Form 990 line items — so your year-end reporting is already structured correctly.

4. Grant Budget Tracking

If you receive grants, your software should let you set up a budget for each grant and track actual spending against it in real time. You should get alerts before you overspend a budget line. Read our full guide on grant management software for more detail.

5. Statement of Functional Expenses

This is the report that shows your expenses broken down by both function (program, management, fundraising) and nature (salaries, rent, supplies). It's required for audited financial statements and is one of the reports QuickBooks simply cannot generate.

6. Donor and CRM Integration

Every donation should flow from your donor management system into your accounting automatically. When a gift is recorded, the journal entry should be created, the fund balance updated, and the donor profile linked — without double entry. Learn why CRM and accounting should be one system.

7. Bank Reconciliation

Match transactions from your bank feed to your ledger. Good software auto-suggests matches and flags discrepancies so reconciliation takes minutes, not hours.

8. Audit Trail

Every transaction should have a complete history: who created it, who approved it, when it was modified, and what changed. This is essential for audit readiness.

Common Fund Accounting Challenges

Challenge	Root Cause	Software Solution
Mixing restricted and unrestricted funds	Manual tracking in spreadsheets	Automatic fund tagging with overspend alerts
Grant compliance gaps	Disconnected systems	Integrated grant tracking with deadline reminders
Painful audit prep	Scattered documentation	Automated audit trails and document storage
Inaccurate donor reporting	CRM and accounting don't sync	Unified platform with automatic journal entries
Month-end takes a week	Manual reconciliation across tools	Bank feed matching and automated reports
Board can't read the financials	Reports aren't in nonprofit format	FASB-compliant statements generated automatically

Comparing Fund Accounting Software

Feature	QuickBooks	Aplos	Blackbaud Financial Edge	Alignmint
True fund accounting	No (classes only)	Basic	Yes	Yes — pre-built per org
Statement of Functional Expenses	No	Limited	Yes	Yes — automatic
Form 990 chart of accounts	No	Partial	Yes	Yes — pre-built
Grant budget tracking	No	Basic	Yes	Yes — real-time
Donor CRM included	No	Basic	No (separate product)	Yes — full CRM
Volunteer management	No	No	No	Yes
Event ticketing	No	No	No	Yes
AI assistant	No	No	No	Yes (Minty AI)
Free tier	30-day trial	No	No	Yes (up to $100K)
Starting price	$30/mo	$59/mo	$500+/mo	Free

Pricing as of February 2026. Check vendor websites for current pricing.

How to Choose the Right Fund Accounting Software

Start with your fund structure. How many funds do you manage? Do you need per-fund budgets? If you manage grants, you need grant-specific budget tracking — not just tags.
Check for real fund accounting. Ask: "Can I see restricted fund balances in real time?" and "Does the system generate a Statement of Functional Expenses?" If the answer to either is no, it's not true fund accounting.
Evaluate the total cost. Fund accounting software that doesn't include CRM, email, or events means you're paying for 3-4 separate tools. Compare the all-in-one cost against the piecemeal approach.
Test with real data. Set up your actual funds, enter real transactions, and generate a real report. If the software can't handle your workflow in a demo, it won't handle it in production.
Ask about migration. Can you import your existing chart of accounts and historical data? How long does it take? Will the vendor help?
Consider your growth. If you're a fiscal sponsor or plan to manage multiple entities, make sure the software supports that without requiring separate subscriptions for each organization.

Try this: open your current accounting system and pull up the balance for every restricted fund your organization manages. If that takes more than 30 seconds — or if you have to open a spreadsheet to get the answer — your software isn't doing its job.

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Related:

Nonprofit Accounting Software — Why your organization needs specialized tools
Fund Accounting for Nonprofits: A Complete Primer — Understanding fund accounting principles
Better Than QuickBooks for Nonprofits — Why purpose-built wins
FASB Compliant Accounting — What nonprofits need to know
Fund Accounting — See how Alignmint handles fund accounting