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How to simplify accounting and bookkeeping headaches using online tools

You can't avoid bookkeeping and accounting, but you can take the pain out of it. Several technical innovations, and a few useful strategic tips will save you time and money, and keep your non-profit's finances in better order.

Things you'll need

  • Bank account(s) and credit card(s) solely used for your non-profit
  • Online banking access, or the ability to download appropriate reports from your financial institution
  • Internet connection and an up-to-date web browser
  • Some basic accounting knowledge, or access to a collaborator who has that knowledge
1

Choose an accounting application

There are scores of accounting applications to choose from. I may be biased (see below), but I recommend an application that meets the following criteria:

  1. online accounting. An online accounting app will let you work from any computer, and facilitates collaboration. Because your data lives "in the cloud" (i.e. on remote, secure servers) it can be accessed by authorized users wherever they are, and on whatever computer they prefer. That eliminates the hassles and risks of handing over accounting data via email, CD or USB key. And if you're a Mac person, but your accountant is a PC person, that's no problem.
  2. uses bank transaction downloading. This means that you can connect your financial institution (I'll use the shorthand "FI" to keep things simple) with your accounting application. The two entities can then talk to each other, and transactions in your FI will automatically appear in your accounting. This eliminates the need for manual entry of data. It also cuts the risk of errors that come from manual entry (like transposing two digits accidentally).
  3. full accounting application, not just an expense tracker. Because you have to report things accurately to your board, your donors, the government, etc., you need full accounting functionality. Look for some description of how comprehensive the app is. "Double-entry accounting" is a phrase to watch for. "Journal transactions" are also useful. Assuming you have a collaborator like an accountant or financial advisor, you don't actually have to understand these things yourself. But they ought to be available for an accountant to do his or her magic. 

See the final step for the names of applications you might consider. (Full disclosure: I'm on the team that launched Wave, a free online accounting application.)

2

Pick a bank that reduces your workload

The right FI (financial institution) can make your workload a lot easier. 

Choose an FI that can be connected to an accounting application. (See step 1, bullet 2.) 

If your FI doesn't allow connections to outside applications, it should at least give you the opportunity to download electronic statements in one of the following formats:

  • Microsoft Money (.OFX)
  • QuickBooks (.QBO)
  • Quicken (.QFX)
  • Simply Accounting (.ASO)

(Why might you need to download a statement? Because you can then upload the whole statement into your accounting application instead of entering every transaction manually. You'll only need to do this if you can't connect your bank with your accounting application in the first place.)

If your FI doesn't do either of those things, consider switching FIs. Switching is a hassle, but will save mountains of work for you throughout the year and into the future.

Major banks tend to meet these criteria. With regional financial institutions and credit unions, you won't know until you inquire.

3

Use your bank accounts only for your non-profit's work

You are probably already keeping to this rule, but it can't be overemphasized: Make sure the bank account(s) and credit card(s) that are used for your non-profit are solely used for the purposes of the non-profit. This will make all future accounting work much, much easier. 

4

Avoid Cash

Wherever possible, pay for things with credit cards, debit cards, checks or electronic transfers. Receive payment the same way. Why? All of these methods of moving money leave a digital trail in your FI statements, which can then be imported directly into your accounting application.

Cash transactions on the other hand leave no digital trail, and therefore must be imported manually. That's more work, and increases the possibility for errors and missed transactions. 

5

Work with a collaborator

Start by doing as much as you can in the accounting program. For many people that will mean tasks like assigning transactions to certain categories (e.g., indicating that a particular check is for office supplies). 

When you hit a place where you don't know what to do, invite a collaborator into your accounting program so that he/she can carry the rest of the load. 

How you invite a collaborator depends on your program. In most cases you send the collaborator a message from within the program, and the collaborator then registers and logs in from his/her own computer. (NB: in some programs, collaborator access is free; in others the collaborator may need to pay a fee.)

6

Enjoy an easier accounting process!

At this point, your accounting is already massively simplified in the following ways:

  • you've eliminated (or dramatically reduced) data entry and the human error that is associated with it
  • you won't wind up with a huge backlog of receipts, invoices, etc. to deal with, because your FI automatically feeds new transactions into your accounting program; you're always up to date!
  • you can do the basic accounting/bookkeeping tasks as needed, but it should take you less time than before because everything is already in the system. Most of the time, all you have to do is categorize transactions.
  • whatever you can't do yourself can be easily done by a collaborator like an accountant
  • official government filings and reports are much easier because your accounting application already has things sorted away where they belong
  • depending on the application you choose, you're probably saving money compared to a traditional accounting application
  • you're probably saving time compared to a traditional accounting application, and you're definitely saving time and headaches compared to using a spreadsheet
7

Choosing an application

I'll mention again for the sake of disclosure that I work for a free online accounting program called WaveAccounting.com. It offers the features I mention above, at no cost (including free collaborators and free bank transaction downloads). 

There are other applications available online. You may come across Kashoo, Less Accounting, Working Point and several others. Note that the feature sets and costs vary.

Depending on your needs, most programs cost between $100 and $400 per year, though some like Wave are free. Most accounting applications at least give a free trial, so you can usually go in and kick the tires before committing.

Make sure you understand whether the fee (if any) includes collaborator and bank transactions, or if those features are extra.

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Page last edited Jun 23, 2017 History

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