Finance professionals in the nonprofit sector are under considerable pressure in 2025. Sweeping federal funding freezes escalated ongoing resource constraints, causing many organizations to make difficult decisions—from reducing staff to scaling back vital programs.
Amid these funding cuts, finance teams are struggling to manage their vast and complex responsibilities, including budgeting, AP/AR, grant reporting, audits, internal assessments, and payroll. Juggling these tasks with fewer staff and tighter resources can lead to burnout. And if tenured staff leave the organization, these challenges are compounded by the loss of institutional knowledge.
Purpose-built platforms like AP automation not only help nonprofit organizations stay afloat, but they help streamline workflows, reduce the risk of human error, and maintain continuity amidst staffing shortages and turnover.
In the current economic environment, where finance teams are being asked to do more with less, financial technology has evolved from a convenience to a necessity.
Keep reading to learn more about finance challenges in the nonprofit sector and how AP automation can help.
Knowing your finance team’s biggest needs
One challenge for AP departments within nonprofits is completing tedious tasks such as manually entering payments and generating invoices. Because cash flow determines nearly everything the organization can do, nonprofits can’t afford to ignore the benefits of AP automation.
As organizations grow, the sheer volume and complexity of transactions increase too. Nonprofits need to keep an accurate detailed record of every dollar spent from donation to expenditure. There’s more of a focus on accountability rather than profitability within nonprofit finance.
Nonprofit AP professionals often run into difficulties mapping each donation’s journey through the business with traditional accounting programs. However, with modern technology, AP professionals can easily generate reports for donors, board members and other stakeholders.
It’s important that every penny is accounted for, especially if a donation is allocated toward certain activities. With technology designed for nonprofits, all accounts can be reconciled on short notice if a donor requests a report. This helps to ensure that funds haven’t gone unaccounted for.
Additionally, nonprofits need to ensure that their suppliers are paid accurately and on time so the suppliers can continue to provide their services with confidence.
Benefits of purpose-built financial technology for nonprofits
Due to the massive influx of data being used in most financial departments, nonprofit organizations may find it helpful to invest in technology that creates efficiencies while helping them maintain control.
Implementing new technology can seem daunting due to perceived cost and training, but it can replace outdated spreadsheets with cloud-based, AI-enhanced software to help automate processes, reduce manual tasks, and improve visibility.
Strained finance teams can leverage near real-time insights and reporting to refocus their efforts on donor engagement, community impact, and mission.
Other benefits your finance team can leverage with new technology:
- Payment automation
- Accurate labeling and attribution
- Robust reporting features
- Time for more strategic work
Download our eBook “Next-Level Nonprofits: Using Digital Tools to Amplify Your Mission” to learn more about how one finance director implemented purpose-built fund accounting technology designed for nonprofits.
