The general consensus in the industry is that accounting software is accounting software. While there are different bells and whistles, the underlying processes are the same whether the entity is a professional practice or a retail store. Sure, there are plenty of vertical packages available to more comfortably accommodate specific kinds of businesses, but for the most part, you can use pretty much any full-featured accounting system and make it work.
That generalization comes to a screeching halt when the entity is a nonprofit.
The problem is that "nonprofit" is such a general term, and encompasses entities as diverse as educational institutions, religious institutions, charitable organizations, volunteer fire departments and ambulance corps, and government entities such as municipalities.
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To muddy the waters even more, each nonprofit can have quite different sources of revenue, different restrictions on how money can be spent, funds that often operate on a fiscal year different from that of the entity, and differing reporting and allocation requirements.
Budgeting in many not-for-profits is also frequently a major task. In many for-profit entities, budgeting may drill down to the departmental or even product level. In many nonprofits, the budgeting process may be even more granular, with budgets in different funds and grants stretching along completely different timelines.
Recognition of revenue and expenses can also be grossly different in a nonprofit. Grant and encumbrance requirements may require different methods of allocation and reporting, and transparency in most nonprofits is also a major requirement.
All of this makes selecting an accounting system for a nonprofit a nontrivial task. What works well for one type or size of entity might be a poor fit for another. Some nonprofits do quite well with a standard full-featured accounting system that has been tuned to accommodate basic nonprofit requirements. QuickBooks Premier Nonprofit Edition and Traverse Not-for-Profit are good examples. Both of these build off of a robust general accounting system.
A nonprofit with more complex requirements might be better served with software that's designed from the get-go for a nonprofit entity, and sometimes even for a specific type of nonprofit entity. Many municipalities fall into this category.
Finally, when selecting an accounting system for a nonprofit, keep in mind that connectivity to other applications may be an important decision point. In many nonprofits, donor management and customer relationship management are mission-critical applications. While many systems can import data from a different vendor's offerings in this area, it's almost always going to be easier for your nonprofit client if they can build an overall system from the same vendor's modules.
PUTTING THEM TO THE TEST
To help in the selection process, we tested seven popular accounting packages for nonprofits. For each package, we installed the software (where required), and performed many of the functions available using the sample client provided by the vendor. Where available, we tested different filtering and report formatting options, as well as looking at the available output formats.
