General tools just won't cut it- You need true fund accounting
Aplos is specifically built to serve the unique financial needs and dynamics of nonprofit groups and faith-based organizations. You can confidently manage your books, financial health, and bottom line the right way, the first time and every time.
Perfect for both large and small organizations
Advanced accounting tools and beautiful reports for organizations that need them
World-class fund and donor accounting features specific to the needs of nonprofits and churches
Aplos is a robust accounting system that allows you to keep track of your grants, programs, and fundraising so you can give your board clarity on your finances.
For nonprofit organizations, choosing between accrual and cash accounting isn't just an accounting decision – it's a strategic choice that impacts everything from grant management to board reporting. Let's dive deep into both methods and explore how they affect your nonprofit's financial story.
Understanding the Basics: Cash vs Accrual
Cash Accounting: The Checkbook Approach
Think of cash accounting like your personal checkbook. Money only "exists" when it physically moves in or out of your account. This straightforward approach makes cash accounting appealing for smaller organizations, but it can mask important financial realities.
Accrual Accounting: The Full Picture
Accrual accounting records transactions when they're earned or incurred, regardless of when cash changes hands. This method aligns with Generally Accepted Accounting Principles (GAAP) and provides a more comprehensive view of your financial position.
Making the Case for Cash Accounting
Small nonprofits often benefit from cash accounting for several reasons:
Immediate Donation Focus
When your funding comes primarily from immediate donations and simple grants, cash accounting provides clear visibility into available funds. This works well for organizations running direct service programs with predictable monthly expenses.
Simplified Bookkeeping
Cash accounting requires less accounting expertise and fewer resources to maintain. Your team can easily track money movement without complex journal entries or adjustments. This simplicity also makes it easier to train new staff or volunteers in financial roles.
Clear Cash Position
For organizations operating on tight budgets, knowing exactly how much money is available right now can be crucial for day-to-day decisions. Cash accounting provides this clarity without the complexity of accrued items.
The Power of Accrual Accounting
Larger nonprofits and those with complex funding structures often find accrual accounting indispensable:
Grant Management Excellence
Managing multiple grants becomes significantly easier with accrual accounting. You can:
Track grant expenses and revenues in the same period they occur
Demonstrate program sustainability to funders
Manage complex multi-year grants effectively
Show accurate program costs regardless of payment timing
July-December: All negative months due to program expenses
Accrual Accounting Shows:
March: -$10,000 (only planning expenses)
July-December: Revenue and expenses matched monthly
More accurate program sustainability picture
Making Your Choice
Consider Accrual Accounting If:
Annual revenue exceeds $5 million
You manage multiple or complex grants
Significant pledges or receivables exist
Board or funders require sophisticated reporting
Planning major growth or expansion
Need to demonstrate long-term sustainability
Stick with Cash Accounting If:
Operating budget under $1 million
Funding comes primarily from immediate donations
Limited outstanding receivables/payables
Simple program structure
Limited staff capacity for complex accounting
Need to prioritize simplicity and clarity
Transition Considerations
Moving from cash to accrual accounting requires:
Investment in accounting software
Staff training or new hires
Possible audit preparation
Updated financial policies
Board education and buy-in
While accrual accounting demands more sophistication, it often provides better strategic insights and stakeholder confidence. The key is matching your accounting method to your organization's size, complexity, and stakeholder needs.Remember: Your choice isn't permanent. Many nonprofits start with cash accounting and transition to accrual as they grow. The important thing is picking the method that best serves your mission and stakeholders today while considering your future needs.
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