Why Nonprofits Should Integrate Payroll Data Into their Accounting System

Nonprofit organizations play an important role in society by addressing critical social issues like poverty, education, and healthcare. However, nonprofits need to manage their finances efficiently to carry out their mission effectively and optimize their resources. For many nonprofits, salaries and personnel expenses make up the largest share of the annual budget. To ensure accurate accounting of expenses, nonprofit organizations must allocate salaries and benefits and OTPS (other than personnel services) to relevant departments, programs, and grants.

Organizations must be cautious when recording payroll in accounting to properly follow the regulations and guidelines of FASB, GAAP, governmental agencies, and funders. As a result, many nonprofits have very detailed payroll entries with very painstaking allocation procedures. Many organizations are currently looking to their payroll processors, including ADP, Paychex, and Paylocity, for potential solutions. The good news is that most major payroll processors already have prebuilt integrations with the popular accounting software such as QuickBooks Online and Sage Intacct, and are recommending these solutions, usually for a small fee or via a third party. It would be in any organization’s best interest to consider a possible integration with their payroll provider. Continue reading to learn about the benefits.

Save time and reduce errors. Without integration, nonprofits must manually enter payroll data into their accounting software, which is time-consuming and prone to mistakes. By integrating the two systems, payroll data is automatically recorded in the accounting software, eliminating the need for manual data entry. This reduces the risk of errors and saves time that can be spent on other critical tasks.

Access real-time financial information. The integration allows nonprofits to have up-to-date information on their financial status, including payroll expenses. This information is essential for making informed decisions about budgeting and financial planning.

Enhance compliance. Nonprofits are subject to various payroll regulations and allocation requirements. Failing to comply can result in penalties and legal action or even loss of 501c3 designation. Integrating payroll with accounting software ensures that complex allocation entries are automatically imported into your accounting software based on the payroll provider’s timesheets. This automation saves time, whereas manually entering timesheets and allocation calculations can lead to mistakes. It is much easier to stay compliant when time flows directly from your provider to your accounting software.

Enhance security. Nonprofits deal with sensitive employee information, such as social security numbers, addresses, and salaries. Integrating payroll with accounting software ensures this information is securely stored and transmitted, reducing the risk of data breaches and protecting the organization and its employees from identity theft and other forms of fraud.

Enhance transparency. Nonprofits are accountable to their donors, supporters, and other stakeholders. Integrating payroll with accounting software provides transparency by allowing stakeholders to see how funds are being spent. It also provides a detailed record of payroll expenses that can be used for auditing and reporting purposes.

In conclusion, integrating payroll with accounting software is essential for nonprofits to manage their finances efficiently. It saves time, reduces errors, provides real-time financial information, and enhances compliance, security, and transparency. Nonprofits that still need to integrate their payroll with accounting software should consider looking into it. Their provider likely has a direct integration or a file transfer solution.

Please contact Kiwi Partners if you need assistance in integrating payroll data to your accounting system. or schedule a free consultation today.