A question from misc.business.moderated:
I want to start a non-profit foundation.
- Is there a good textbook out there on non-profit accounting?
- Will Microsoft Money Small Business Version be sufficient software for a non-profit organization.
1. The basics
Non-profit accounting is not different in principle from for-profit accounting; the only difference is, a non-profit retains all of its earnings. This said, if you want to qualify for grants, there are specific rules set by grant makers that you must follow.
Generally speaking though, you don’t want to do non-profit accounting by yourself. Consider engaging a specialist accounting firm at least to prepare your tax returns. While you are at it, ask them which software they recommend.
2. The software
It’s been a while since I looked at it, so I can’t recall the specifics, but here’s a way to check. The IRS requires that all non-profits submit a Form 990 (Return of Organization Exempt From Income Tax) annually. To complete Form 990, you need to be able to track your income and expenses on least two, sometimes three, levels. First, you have to have an object expense label, e.g., “Office Rent”. Second, you have to have a functional expense label, e.g., program services (anything that’s mission-related goes here), fundraising, or operations. Third, anything related to program services must be categorized by project (obviously, if you only have one project, this is fairly easy to accomplish, but do you ever?) So the simplest way to assess suitability of a particular accounting package for non-profit use is to figure out it it can track income and expenses by object, function, and project (which should be fairly easy to establish with a free trial version).