By Cheryl Olson, CPA, CGMA and Diane Shey, CPA
In part one of this series, we looked at the process for identifying your organization’s specific functional needs in an accounting system. The next step is to compare the functionality of your existing accounting system to the needs you identified previously.
This step requires going beyond how the system is currently being used to include the understanding of all of the features available. You may want to look at other modules that you haven’t purchased (or are not currently using) or more update-to-date versions that may not have been installed. We have found this process is most successful when you involve a representative from the software company or a consultant who is very familiar with the existing accounting system so there is a thorough comparison between “needs” and “haves.” If that is not possible, thorough research and demos should be conducted, and enough staff time should be invested in this project.
It is important to assign a project leader for this work. Whether that leader is an internal person or an external consultant will depend on the organization’s product knowledge, staff capacity for taking on additional work, and the budget for hiring consultants. Make sure your timeframe looks out three to five years to align with any established strategy. Keep in mind, there may not be one system to do everything your organization wants, so prioritizing the needs is critical.
After analyzing your existing accounting system, you may determine it doesn’t meet your business needs. The most common reasons are you have outgrown the system (such as QuickBooks), you need more functionality for your particular business model, or you need better integration with other systems being used. If you decide to explore a new accounting system, use your functional needs to find the best fit.
Depending on the type of NFP organization and lifecycle stage, we usually suggest you start by looking at three systems, depending on fit and if there are any organizational bidding or procurement requirements. Ask other similar organizations what system they use and how they like it and look at the following areas to guide your software selection:
- Discuss the project impact to the nonprofit’s mission, strategy (at both the IT and organizational level), goals, staffing allocations, and budgets to ensure overall organizational alignment.
- Review all hardware and software currently in place to best understand existing enterprise architecture. If there isn’t a dedicated IT department handling this, a consultant may be needed to ensure the upgrade isn’t a piecemeal decision.
- Determine the integration needs, such as with a CRM, fund development or membership system.
- Review the organization’s preferences with on-premise versus cloud-based solutions, as well as needs for remote and mobile functionality.
- Establish total cost of accounting system ownership for capital, financial and human resources – hardware, software (new or updates), licenses, training, upgrades/maintenance, staffing, consultants, etc.
- Determine who will be the project manager. As with any project, accounting software selection requires a project plan with a leader, team, timeline, budget, and milestones for checking-in along the way.
- Obtain estimates to get board approval as part of a capital budgeting process, as well as determine funding options. Some organizations dip into operating reserves, some get donor funding, and some identify other revenue streams, such as financing.
- Coordinate the vendor meetings for discovery and demos
- Handle the request for information (RFI) or request for proposal (RFP) process
- Create or follow the established decision-making process
Your accounting system needs to be a useful tool integrated with other business systems as part of your overall enterprise architecture. The tool needs to support internal controls and efficiencies for both process and staff time. There is not one perfect accounting system for every organization or every function, but a well-thought-out system selection process will help ensure success in its implementation and future use.
If you don’t know where to start, reach out to Cheryl or Diane for guidance. Whether you decide to implement a new system or improve your current system, in the end you’ll have the system you need and deserve.
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