5 Indicators It’s Time for Your Nonprofit to Change Accounting Systems– July 25, 2017 by Joe DiFranco

As is the case with any growing organization, a time will come when your not-for-profit will need to take a good look at your accounting system and ask if it is time for a change. But what’s the tipping point? It may be different for each organization, but it may be time to start considering a change when: 

  1. Finding and extracting information involves a significant amount of manual effort,
  2. Information is not readily available in the organization until manual reconciliations and adjustments are performed,
  3. The current system becomes outdated, out of service and potentially a security risk,
  4. Financial or stakeholder information and reporting requirements have become more complex, and
  5. Your not-for-profit wishes to implement more green and paperless functionality within the accounting system. 

If you are experiencing one of these issues, or another reporting or informational issue that seems to make your organization run inefficiently, it’s time to take a look. Below are a few important items to consider when evaluating a new system: 

How complex of a system/which capabilities do I really need?

An organization needs to balance the capability of the accounting system with the demand it requires on its daily users. A vast and robust accounting software and enterprise resource planning (ERP) system will be extremely adept at running detailed reports and performing analyses; however, an ERP system also will require more data to be input, more advanced user training and resources, and many extra dollars. On the other hand, a smaller accounting system may require more work to be performed outside of the software than in, creating more headache than it’s worth. 

Is the cloud the way to go?

Many accounting software packages now offer a cloud-based accounting environment. While this typically is less expensive to implement, there will be a monthly fee (usually per user) for access to the cloud-based software and records. If online, real-time access across multiple locations and people within an organization is important, the cloud-based accounting system is a good option to explore. 

Which ‘add-ons’ are right for me?  

Many accounting software programs have gone down the route of offering a basic off-the-shelf version of the software with the ability to add-on more robust modules when needed. For example, an accounting software may offer additional software you can purchase to track fixed assets or inventory on top of the basic package. It is important to know what accounting functions will be handled inside of the software, rather than outside. 

How long will it take to transition?

Installing a new accounting software is rarely completed in just a few months. It is important to take the time to implement the new software correctly and transfer the necessary data from the old system to the new system to prepare all the needed reports. What may seem like a simple migration could take six months to a year or longer. If an organization wants to have a new software in place for the next fiscal year, it’s important to start looking early.
 
As with any major accounting system decision, before taking the plunge, do your research, which should include talking to vendors, peer organizations and your close advisors to see which systems have worked well for organizations similar to yours.
 
Cohen & Company is not rendering legal, accounting or other professional advice. Any action taken based on information in this blog should be taken only after a detailed review of the specific facts and circumstances.