Vendor Spotlight: GMS Accounting and Financial Management System

In this spotlight report, TEC Research Analyst Aleksey Osintsev examines GMS Accounting and Financial Management System, which was specifically designed for not-for-profit organizations. Learn all about GMS’s customers and marketing positioning, and how the software addresses the challenges for not-for-profit accounting. Also featured is a high-level overview of GMS Accounting and Financial Management System functionality.
It is well known that organizations whose overall objective is not to increase their business profitability have as their mission helping and facilitating various initiatives for different communities, territories, and even countries. It is not well known, however, that such organizations, also called “non-profits” or not-for-profits, have their own peculiarities, differentiating them from regular for-profit businesses and estimably affecting their internal management processes, including accounting. As a result, for managing their everyday activities, not-for-profits typically use software that is specialized and tailored for the field.

GMS's Customers and Market positioning 

So, accounting automation for non-profits is the area in which GMS, Inc. has been working since 1980. With more than 30 years of experience, the company feels pretty comfortable in meeting the field’s specific needs. In a recent conversation, Donald Cassady, Director of Accounting Services at GMS, described the company’s direction, “Grant- and contract-funded non-profit organizations is the accurate description of our market. We have children services, senior centers, area agencies on aging, crisis centers, community action agencies, economic development corporations, regional planning offices, and even some departments within a city’s governments among the clients of GMS.”

With approximately 700 clients, GMS serves organizations ranging from small agencies with 2−3 employees to multimillion-dollar−budgeted non-profits with hundreds of personnel. Most of GMS’s clients are based in the United States, which is no surprise considering that GMS heavily concentrates on US legislation compliance of non-profits.

Mr. Cassady continues, “We are active in making sure we keep our clients in compliance with US rules and regulations handed down from federal government as well as from most of the state governments. We have to keep very current of that, in addition to having a good product. A very important part of the strategy is to be able to say to our existing and prospective clients that if they use the software the way it was designed, you will be in compliance. That’s a critical thing.”

Challenges in Not-for-profit Accounting Practices

“The way it was designed” are the crucial words here. They underline the major distinction of GMS software from the average accounting package on the market—its specialization in grant- and contract-funded non-profits. Surely, other financial packages can handle the non-profit peculiarities, but they would first require customization, as there are many differences between the two business types and non-profit specifics would not be easily supported. The GMS system has been designed to cater to the not-for-profit specifics.

Generally speaking, the differences between not-for-profit and for-profit accounting standards are notable, but not fundamental. Still, day-to-day activities are pretty similar to both accounting types overall. The major differences originate from the different nature of the businesses. Stakeholders of not-for-profits are mostly concerned with the transparency and appropriate use of funds, as well as their distribution among recipients. Standards for nonprofits really come down to accountability and reporting, as these organizations do not own the money they operate with. Therefore, they have to be 100% accountable, or as Cassady clarifies, “explaining not that I spend X amount on something but also why I spent it, was it approved, was it in line in the budget.”

Another vital distinction of non-profits relates to the source of financing. In the not-for-profit world, no sales operations are involved, and the only funding sources are defined with finite grants or contributions. Non-profits aren’t able to use sales mechanisms to change their spending budgets. Thus, the software should be capable of properly managing a limited and finite pot of money, with budgeting serving as the main working tool. Flexibility in supporting multiple types of funding and revenue sources is also highly desirable. Audit openness and compliance with intense governmental standards are the other sides of the equation.

Figure 1. Timesheet Reports

The third essential difference between the two accounting practices relates to the reporting arena. As different financial information is required by the public, stakeholders, and governments, it follows that the financial reporting structure would also be different. Reflecting those differences is the use of statements of financial positions, activities, or functional expenses rather than traditional balance sheets and income statements. Also, some data is not reported in the for-profit world, such as detailed reports on funds received. In addition, there are also differences in reporting for not-for-profits that are classified by state and local governments, like some regional planning offices that are required to follow reporting requirements in accordance with the Governmental Accounting Standards Board (GASB). Other nonprofit agencies classified as 501(c)(3) corporations are required to follow reporting requirements in accordance with the Financial Accounting Standards Board (FASB).

Lastly, a big issue that accountants of not-for-profit organizations face is properly setting up cost allocation procedures. Costs related to, say, employee leaves, fringe benefits, indirect costs, dual indirect pools, service unit and special allocations, agency administrative costs versus program administrative cost distinctions—should all be addressed using a financial software.

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