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Nonprofit accounting – Mass-market application

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By Todd Cohen

A nonprofit application for QuickBooks, accounting software for small businesses, is set for release in January by B2P, a Chicago firm that develops tech-based business tools for nonprofits.

The new product, to be called NonprofitBooks and bundled with QuickBooks, represents the first mass-market accounting software tailored for nonprofits.        

“B2P wants to help the majority of nonprofits do good nonprofit accounting with an inexpensive and easy-to-use product,” says Jeanne Peters, financial management consultant for CompassPoint Nonprofit Services, a nonprofit technical assistance group in San Francisco and San Jose, and a member of B2P’s QuickBooks steering committee.

B2P is among the first 40 groups working with Intuit in Mountain View, Calif., in the software-maker’s first effort ever to help third-party developers build customized applications and products for QuickBooks.

B2P will charge $249 for its application for QuickBooks — off-the-shelf, general-purpose accounting software that costs $150 to $250.

Bill Levis, senior fellow at the Urban Institute in Washington, D.C., says keeping the price below $300 will help make the new application competitive, compared to $1,200 to $10,000 for mid-range accounting software designed specifically for nonprofits.

The new application is a “breakthrough,” says Levis, co-author of Unified Financial Reporting System for Not-for-Profit Organizations.

“Now there will be an industry-specific software product that goes along with QuickBooks,” he says.

Tim Mills-Groninger, associate executive director of the IT Resource Center in Chicago and a member of B2P’s QuickBooks steering committee, calls QuickBooks “one of the best examples of robust and easy-to-use general accounting software out there.”

The new application, he says, “is bringing substantial economies of scale to an important part of nonprofit management.”

QuickBooks is widely used by small and mid-sized nonprofits, which typically lack high-level accounting expertise, says Peters. Nonprofits with annual budgets of $1 million or less represent roughly 80 percent of charitable nonprofits in the United States, she said.

But even nonprofits using QuickBooks often hire consultants to set up their accounting systems and generate reports for funders and regulators, Saul says.

“While QuickBooks is inexpensive, the use of it for nonprofit accounting purposes has a lot of collateral costs because it is not designed to meet the accounting needs of nonprofits, which are distinct,” he says.

QuickBooks, for example, helps small businesses track customers, departments and jobs, Saul says, while nonprofits need to track donors, programs and grants.

Many nonprofits also deal with restricted grants requiring special accounting treatment and face a variety of reporting rules — needs that QuickBooks can’t handle easily, he says.

B2P created NonprofitBooks in partnership with a steering committee of 16 nonprofit and financial experts, including CompassPoint, the Nonprofit Financial Center in Chicago and the Accounting Aid Society in Detroit.

NonprofitBooks aims to help a nonprofit:

* Set up its chart of accounts using a new “Unified Chart of Accounts,” or UCOA, developed by the Urban Institute and nonprofit and accounting leaders – with separate options for different fields of interest, such as human services or the arts.

* Track support, revenue and expenses in keeping with nonprofit accounting rules, and allocate shared expenses to more than one program.

* Report expenses both by “natural” classifications, such as rent, salaries and supplies, and by “functional” classifications — programs, fundraising, and management and general. Also report net assets by category — unrestricted, temporarily restricted and permanently restricted.

“We’re trying to democratize software for nonprofits,” Saul says. “It is too expensive, it is too underdeveloped and it’s not widely supported.”

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