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How nonprofits can meet the FASB accounting standards

from  November 2, 2023 | 4 min read

The new rules issued by the FASB are designed to provide better information to donors, grantmakers, creditors, and other stakeholders who read nonprofit financial statements. The new rules will improve how a nonprofit organization can tell its story through its financial statements. The Financial Accounting Standards Board (FASB) is the independent organization that establishes financial accounting and reporting standards for public and private companies and nonprofit organizations in the USA that follow Generally Accepted Accounting Principles (GAAP). 

The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides valuable information to investors and others who use financial reports.

FASB accounting definition

The FASB develops and improves the way financial accounting standards are issued. Accounting standards are the guidelines companies use to report information, such as financial conditions and results of operations, in their annual reports. The FASB follows the GAAP standards, which are the rules and regulations that are the foundation for how companies report financial information.

Functions of the FASB

  • Establish and interpret GAAP

  • Develop and improve the implementation of GAAP

  • Issue statements with accounting standards

  • Oversee changes to existing set standards and make sure proposed changes meet legal requirements

  • Ensure investors receive information

FASB and nonprofits

The FASB has a long-standing commitment to the nonprofit sector. They have addressed the accounting and reporting needs of the industry, both for transactions that are unique to the sector (e.g., contributions received) and for transactions that it has in common with public and private business enterprises (e.g., revenue recognition from contracts with customers).

Nonprofits need to maintain an awareness of what’s new, what’s effective now, and what’s on the horizon to ensure their accounting and financial statements continue to comply with GAAP.

How can technology help?

Although many accounting software systems handle the needs of businesses in many industries, nonprofits have unique business models and accounting standards and require different features and functionality from their accounting software. Nonprofits require a minimum level of fundraising each year to reach their goals, so they need to focus on keeping revenue from fundraising high and costs low. Instead of generating a profit for shareholders or reinvestment in the business, nonprofits use their income for things like research funding, program expenses, outreach, and work that directly impacts their mission.

Most nonprofit organizations look for the following business benefits from their financial planning and analysis software:

  • Improved decision-making

  • Access to real-time information

  • Increased efficiency

  • Streamlined processes

  • Automation

  • A single source of data truth

  • Multi-currency viewing

  • Supports multiple languages

Despite rising competition for grants and falling support from individual donors, the best nonprofit organizations are still raising money for pivotal causes. But how are they doing it?

The ERP for nonprofit opportunity

Conditions might be challenging, but with the right approach and a dependable infrastructure built explicitly for nonprofits, it is possible to raise money and use it more efficiently, even in a highly competitive climate. With the right technology and an insight-based approach, nonprofits can ensure that less money makes more of a difference. To make donations work harder for their organization, many nonprofits invest in purpose-built nonprofit enterprise resource planning (ERP) platforms to run their operations.

Proof of performance

The best ERP software on the market includes built-in grant management tools, so nonprofits can easily meet compliance and auditing requirements and keep up with restrictions and regulations. This reduces the burden on administrative staff so that they can put more power behind value-added activities. The right ERP platform features detailed reporting capabilities for granular analysis of performance. Doing this validates future decision-making using the impact of previous spending, making organizations more agile in reacting to what works best for front-line service delivery. Transparent reporting shows both institutions and individual donors how their contributions are being spent. This proof that resources are being used wisely encourages donors to keep supporting the cause and, in some cases, motivates them to increase the amount they donate.

A solid foundation for raising more money

Whether it is a case of securing grant funding or attracting new donors, raising money relies on two things – creating an attractive proposition and demonstrating that resources are being spent in the best possible way.

Leading nonprofits are using ERP solutions to manage finances better, track the impact of donations, and build trust with all types of donors to ensure continued loyalty. But more importantly, the technology they use helps these organizations become more agile and transparent in their operations, letting them allocate more resources to activities that make a difference, including raising more money for their key causes.

How Unit4 can help your organization

Unit4’s next-generation, smart, cloud-based solutions for nonprofit organizations focus on People Experience to help free your teams to do more of what matters: making a positive impact in the world. Our purpose-built solutions transform work, so your people gain the time and flexibility to focus on achieving your mission.

It’s vital to make the best use of your people’s precious time and to maximize the impact you can deliver with available funding. You also need to satisfy the rising demands of regulators and tech-savvy donors. Conventional, labor-intensive legacy systems and outdated manual processes no longer meet these needs. So why let them hold you back?

Make your teams more productive while increasing the visibility and control they need to achieve your mission. Click here to book a demo of our FP&A solution, or check out the Unit4 People Experience Suite here.

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