How to find the best accounting software for your fiscal sponsorship program without breaking the bank
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Keeping track of funds is a critical component of fiscal sponsorship. In fact, accounting is probably the most important part of what a fiscal sponsor does on behalf of its sponsored projects.
By definition, a fiscal sponsor is a nonprofit organization that provides fiduciary oversight, financial management, and other administrative services to help a project or program raise funds via the sponsor’s tax-exempt status. A fiscal sponsors' 501(c)(3) tax status relies on their ability to track and manage these funds accurately. Because of the benefits it offers, any kind of tax-exempt status it’s a hard thing to get - and an even harder thing to keep.
Failing an audit is always pretty high stakes, but for a fiscal sponsor its even higher risk because it puts lots of organizations at risk.
More than just protecting your tax status though, it’s important to think about financial stewardship of funds and proving to donors that you’re accountable and transparent with focusing funds on your mission (even if they don’t always know to ask).92% of all fiscal sponsor cite Financial Services as their top service (fund receipts, bookkeeping, reporting, and oversight), more than any other category including fundraising and any other back office service.
Picking the right system can keep you proactively audit-ready, while also providing a valuable service to your community of sponsored leaders.
The best data we have is the 2023 Field Scan by Social Impact Commons. It found that most sponsors are not using enterprise-level accounting systems:
It's important to consider this data by fiscal sponsor size. Most organizations with <$10M in expenses are on QuickBooks.
Above that, you start to see more enterprise systems (Sage, NetSuite) as organizations have more customized workflows. This makes sense, as the cost steps up from $170 per year to $10K+ per year. Plus, consultants to implement and customize your instance can create even greater costs.
Ultimately, this decision boils down to a few things for fiscal sponsors. Some questions to ask yourself before you get started:
Key Features for fiscal sponsors:
Less than half of fiscal sponsors track the fully-loaded cost of their fiscal sponsorship services. The right accounting system not only needs to fit your budget, but it can also help you stay on track. We recommend thinking about the Total Cost of Ownership (TCO) of an accounting platform when evaluating different options:
Total cost of ownership (TCO): Hard CostsSoftware license + setup/implementation + training + maintenance + ongoing admin time.
Are there any software discounts available for fiscal sponsors?
No tool is packaged well for fiscal sponsors, who have a high degree of complex financial needs (e.g. fund accounting, permissions, and approvals) with a high number of potential users across the project portfolio. Commercial models between accounting platforms are more different than you’d expect. Some prefer user-based pricing, some are more module based, like you’ll pay more for a budgeting/planning tool.
All pricing is subject to change, and that usually means its going up. Customizations (users, modules, entities, integrations) can drive significant price increases and staff time cost down the line.
The top 3 platforms offer nonprofit-specific packaging and pricing, however you may need to purchase through a partner to get those benefits.
Fiscal Sponsors with <$10M in expenses: QuickBooks Online
Fiscal Sponsors with >$10M in expenses: Sage Intacct
Runner Up:
NetSuite: powerful and customizable, but only worth it for the largest sponsors with dedicated finance teams. In my experience, it requires a steep learning curve and a lot of work to make information shareable
Honorable mentions that didn't make the list this year:
Want to learn more? Check out other resources:
