This is the first post in our blog series: Best Practices for Selecting Nonprofit Accounting Software
Having easy access to mission-critical financial information is key to the growth for nonprofits, especially if you are expanding your services, opening new locations and winning more grants.
However, too many nonprofit business decisions are made with educated guesses from a patchwork of financial data drawn from your accounting software combined with spreadsheets, email and hardcopy reports. This time-consuming and error-prone process of consolidating even basic accounting data is a symptom of legacy accounting software.
Thus, the first step in selecting the right nonprofit accounting software to help you achieve your mission is having the will to make a change. Here are five signs that your software needs replacement.
1. Software Doesn't Age Like Wine
The average lifespan of software ranges between five and ten years. As the years go by, software updates and support are more difficult and costly, particularly considering forward compatibility with the latest version of software platforms. It may be hard to find someone who can even make small updates, let alone feature requests. This is especially true for homegrown legacy software when there is only one or two people that know how to update the system – and what happens when they retire or get hit by a bus? Wine ages well with time, but an aging accounting software system just leaves you with the taste of sour grapes.
2. Data Invisibility & Other Mysteries
A big challenge that we see time and time again is that nonprofits struggle to discern profitability and margins per service, location, project, or fund. Nonprofits make a valiant effort to blend data at a high level, which is the best they can do, but they don't have much confidence in the numbers because of the limitations of their accounting software, having to mash up data between systems, and having to go through time-consuming gyrations just to get the data in a coherent format each time it's needed. This leaves your actual financials being somewhat of a mystery because you're just not quite sure if that data is accurate.
3. Somebody Help Me Please!
Nonprofits struggle with basic user support for old accounting software. If your main support is turning to Google for answers because you no longer have vendor support, this should be a red flag. Vendors and their resellers are not eager to support old versions. It's difficult to keep a staff trained on both the current version and previous versions. They're always thinking about the next big release, leaving users of old versions to fend for themselves. This leaves fragmented processes and tribal knowledge to make legacy accounting software usable.
4. Tag! You're It...
Most older accounting software systems do not accommodate automated workflows. This leaves your staff with manual, error-prone workflows for just about any business process from initiating a purchasing request to creating quotes and fulfilling orders. Nonprofits often have to enter the same data into more than one system, complete with inter-departmental hand-off emails, phone calls or even faxes.
If you wanted automated workflows in the past, you'd have to buy tier one or tier two systems like Oracle, SAP or Microsoft Dynamics AX, whose cost could exceed seven figures (not to mention annual maintenance).
5. Doing the "Work-Around" Dance
Nonprofits using legacy accounting software often have to turn to Excel spreadsheets, Access databases, hardcopy reports, and email to do mundane tasks like allocating costs, calculating commissions or figuring out the right pricing for a service. Many nonprofits still use spreadsheets for consolidated financials. Modern accounting software greatly improves efficiency and data integrity. You get additional functions that yield accurate data, which is very good news for nonprofits putting up with bad software patched together with spreadsheets and other tools.
What to Do about It
Nonprofits don't select software every day, accounting or otherwise, so it's understandable that there's a lot of anxiety. This keeps nonprofits tethered to archaic software platforms.
The good news: accounting software is now more feature-rich, easy to use and affordable than ever.
The challenge: there are many accounting software options out there, so the trick is how to select the right one for your nonprofit. This will be the subject of our next blog post in this series.