%20(9).png)
Cloud-based accounting refers to utilizing an accounting system that runs on the internet, rather than on a local computer. Data, tools, and financial records are stored in the cloud, or in the web. This allows organizations to record, store, and process financial transactions anytime and anywhere, using any device with an internet connection.
Non-profits, like charities or foundations, need to track donations, grants, program expenses, and other financial information to maintain transparency and comply with regulations. A strong accounting system reflects on the organization’s accountability, promoting honesty and transparency to the stakeholders. Cloud-based accounting offers non-profits a more flexible, efficient way to do this.
Fund accounting is a specialized system for non-profits to track money by purpose as directed by the donor, foundation, government agency, or by law. Project-based budgets focus on the expenses or revenue for a specific project. Non-profits often run multiple programs (say, a feeding program, a tutoring program, a building renovation), each with its own budget that must be tracked separately.
Non-profits need to maintain relationships with donors and fund sources and to track each grant’s budget restrictions and reporting requirements. For this, donor and grant tracking systems need to be efficient, preferably automated and centralized.
Restricted funds are those earmarked by the donors for a specific purpose, while unrestricted funds can be used at the organization’s discretion to cover necessary expenses. It is crucial to keep track and distinguish between these two types of funds in accounting and reporting to avoid misusing the funds, which may lead to legal consequences and damage trust with the donors.
Non-profit accounting is reported through the IRS Form 990, which is the annual tax filing for most non-profits in the U.S. A cloud-based accounting system makes this process seamless, making it ready for annual audits.
Staff, volunteers, board members, and auditors can securely access the system from anywhere with an internet connection.
Updates happen instantly, so reports and dashboards are always current. Also, multiple users can view and work on the same data without worrying about version conflicts.
Cloud accounting integrates with donor management systems to track donations, pledges, and grant requirements. It also automates thank-you letters, receipts, and recurring donations, which improves donor stewardship and grant compliance.
Role-based permissions ensure only the right people can see or change sensitive data. Moreover, the easy audit trails (who did what, and when) come in handy when needed. This level of transparency supports accountability, which is essential to keep donors’ trust.
Other benefits of cloud accounting are simplified fund and project tracking, cost savings, enhanced security and backups, and easier IRS Form 990 and audit preparation. The list goes on! Switching to cloud-based accounting is a wise choice, especially for non-profits which have widespread operations and diverse stakeholders that depend on the data in these accounting systems.
Because cloud accounting systems are remotely accessible, it is important to assign who can view, edit, or approve transactions. Restricting sensitive areas (like payroll or bank reconciliations) to authorized staff is also crucial to protect against accidental errors or fraud.
To avoid system errors, funds and projects must be set up correctly from the start (e.g., general fund, restricted grants, scholarships). Regularly reconcile fund balances, and link income and expenses directly to their fund or program.
Connect your donor database or CRM to your accounting system to automate donation tracking, grant schedules, and acknowledgments. This reduces duplicate data entry and improves reporting.
Other best practices for cloud accounting are regular reconciliations and reviews, backup and data security checks, training staff and volunteers, and maintaining an audit trail.
Not properly configuring fund accounting at the start (restricted vs. unrestricted) leads to messy reports and potential compliance issues later
Giving everyone full admin access increases the risk of accidental data changes, fraud, or unauthorized transactions.
Uploading incomplete or poorly named documents and failing to attach receipts, grant agreements, or donor letters directly to transactions hurts audit readiness.
Forgetting to turn on two-factor authentication and sharing passwords instead of creating individual logins can expose sensitive donor or financial data.
By adopting a cloud-based accounting system, non-profits can work more efficiently, strengthen accountability, and build greater trust with donors and stakeholders. Now, streamline your non-profit’s accounting with cloud solutions. Get started with Anomaly CPA here.
With base level subscriptions starting at $400/month, our engagements are relationship based, combining initial strategy, implementation and ongoing support. We work with our clients throughout the year to help them transform their business. Please answer the questions on the following page so we can determine if we are a mutual fit.
