Not every business runs on the account of profitability, there are some organizations (Especially non-profit organizations) that greatly work for the purpose of humanity. Their purpose is not to generate profit but to serve humanity. Anyway, such organizations do get donations, raise funds, and a lot more for that reason they need to have a proper management and control over funds. To manage huge donation amount and fund management of their business, they inclined towards ‘fund accounting’.
Are you aware of fund accounting? If not, this article is a complete guide. Make sure to read this article till the end so that you don’t miss any important information in between.
What is fund accounting, you ask?
In layman’s terms, fund accounting is system of accounting which non-profit entities use to track the amount of cash assigned to different purposes. With FA, they also learn to use that cash in most appropriate way. Let me tell you that the focus of FA is on accountability of business rather than profitability of the business. If you’re running a non-profit organization, you will need to garner information to make future business decisions. So that you can get to know how to use limited business resources.
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Top examples of non-profit organizations using fund accounting –
Below listed are top examples of entities using fund accounting, which include charities, colleges, universities, schools, artistic foundations, hospitals, orphanages, nursing homes, charitable firms, government organizations, and so on.
Well, these non-profit organizations need to manage their funds using fund accounting service. In a way, you can say that these organizations need to use FD. This way they can manage the funds they collect throughout the year.
Benefits of utilizing fund accounting
There is no doubt that non-profit organizations are quite different from those of professional and commercial business. And that’s the reason their fund collections are also different from other companies and firms. Let’s have a look at the benefits of utilizing FA you can reap in your organization:
- – Non-profit organizations financial structure is much different from businesses and organisations.
- – No one bear the weakness in accounting. Regardless the type of organization you’re running, you just can’t bear the weakness in accounting and poor management of funds right. That’s why fund management helps companies/organizations secure their funds.
- – Those working in non-profit accounting work should be familiar with unique requirements of financial structures and accounting practices as well.
- – A professional managing FA must be familiar with every accounting term and practicality.
- – Fund accounting helps in presenting accurate records in accounting statement and books.
- – With accurate fund accounting and proper management of funds, the organizations don’t get puzzled for the money they have received as they have proper records of finances.
These were some of the benefits of using FA. I hope you understood all of them to some extent as per your level of understanding. The interesting thing is that most of the accountant providing fund management services use accounting software such as Quickbooks, Quickens, Sage, and many more. Using these software makes the fund accounting quite easier.
How does fund accounting help management of the organization?
Now that you have read about FA, examples, and benefits, it’s time to discuss how fund accounting can be helpful for any organization. So, without much ado, let’s talk about it.
Whether the company/organization wants to monitor and manage their allocation of funds, they take help of fund accounting which makes it super easier for them to know about the funds they have got from a particular person, company, or any other entity for the work they’re into.
Let’s come to conclusion
In this article, you have read everything which you must know about FA right. Starting from understating the meaning of fund accounting, moving on to examples, tackling the benefits, and ending with how it can be helpful for organization, it was a pretty deep article for you to grasp the meaning of fund accounting. I hope I was able to make senses. Even you’re eagerly looking for a professional accountant who can help you with FD; Kayabooks should be your right spot. We have professional accountants and bookkeepers who can be of great help.
So, get in touch with us right away.