This is the fourth post in our blog series: Best Practices for Selecting Nonprofit Accounting Software
Once you've identified your final nonprofit accounting software candidates from vendors and partners, you'll next need to evaluate their proposals.
Considering that the effort is like comparing apples to oranges, here's how to effectively compare so you can choose wisely by leveling the playing field.
Initial Proposal Review & Reading Between the Lines
The first step is to make sure their proposals map to your accounting software requirements – and we recommend that you send them back until they do. We also recommend that you apply a grade for how each accounting software application compares per requirement on a 1-5 scale so you can evaluate how well they manage the accounting for funds, programs, projects, and grants.
You'll then need to identify how much of what is being proposed is out-of-the-box functionality vs. custom development. Many believe customizations to be a scary thing to consider, but they often ensure that the software meets the unique requirements of your nonprofit instead of making your nonprofit fit what the software can do – the latter is like pushing a square peg through a round hole.
Next is to identify the total cost of ownership (TCO), which includes costs over the course of at least a 5-year period. These include:
- Initial purchasing costs
- Annual maintenance or subscription
- Cost to make customization compatible with each new release
- Hardware and related costs
- Other costs
You'll also want to estimate how much cost and time the system will save to identify ROI and payback period – i.e. how long it takes for your accounting software to pay for itself.
Two Cloud Flavors
If you're considering a cloud solution, just be sure that you know what type of cloud you're getting: pure cloud vs. hosted cloud.
A pure cloud solution is a centralized, multi-tenant platform that is hosted on servers owned by the software vendor, often in a third-party data center like Savvis that are SSAE 16 SOC1 Type II audited and PCI DSS certified (the AICPA's standard for cloud security, availability, processing integrity, confidentiality, and privacy). Updates to pure cloud accounting software are made on a fairly regular basis by the software vendor, so your users see new features when they log in. Similarly, every user in this model is always accessing the same version.
Hosted cloud accounting software follows an older paradigm; it is not a centralized multi-tenant system, nor is it hosted on the vendor's servers, such that it will need to be manually updated by whoever hosts it when the vendor makes them available. This sometimes results in different users from your organization being on different versions, which causes problems. Also, partners sometimes do the hosting, but often don't have robust security or back-up procedures in place.
The Right Partner
Only by effectively evaluating vendor and partner proposals with this methodology will you know that you've found a nonprofit accounting software and partner that can take care of the accounting heavy lifting so that you can focus on achieving your mission.