6 Mistakes to Avoid with Nonprofit Accounting Software

Accounting mistakes...for Brian Meyer at NTEN.

A recent Linkedin thread related to new software system implementations and the various systems on the market, brought out many comments on this topic. Clearly several users had their favorite systems,  but after many indicated which system they liked best or had used, the real issue came out. And that is that no system will perform satisfactorily for you without proper design and implementation.

Whether implementing a new system or improving an existing one, there are several design and procedural issues that need to be addressed.

1. Inadequate Codification

One of the most important issues is coding, particularly the chart of accounts. If transactions are not coded in a way that allows for easy sorting and selecting for reporting, you find yourself extracting (or rekeying) data into spreadsheets and manipulating it there.  In fact, one of the symptoms of an inadequate or poorly designed system is over dependence on spreadsheets. If you’re using spreadsheets for routine reports (weekly, monthly, quarterly) that is probably an area you should look at automating. Look at your reporting and work backwards to make sure your account code can support your reporting needs.

Beyond the chart of accounts make sure vendor and customer ID’s are consistent and make sense for the end-user. For instance, if your system looks up vendors by alpha numeric codes, don’t use numbers to identify them. Use a consistent variation of their name so they are easier to find. And use the same logic with employees.

2. Not reviewing processes/procedures

One if the greatest misconceptions regarding software is that it will fix broken business processes. It will not. But it may bring them to light! As an example, if you are entering invoices AFTER the checks go out, most software will NOT accommodate your process (I actually have encountered this scenario).  Please don’t blame the software! Review your process and see how it might be changed to allow the software to improve your accuracy and efficiency.

3. Not taking advantage of software features

Oftentimes software is purchased with the intent of utilizing advanced features, but inertia takes over and things revert back to the “old” way.  Areas like auto reconciliation, reporting, automated budgeting processes, workflow, and document management all sound great, but are indeed HARD to implement.  On the other hand, there is certainly a cost/benefit to the time and effort it takes to accomplish these tasks.

It is very much like a “mini-conversion” of that task you are undertaking.  First, make sure it’s an effort for which you’ll realize a return on investment. Indeed, some features may not work as demonstrated. Talk to other users who have already implemented that feature and can validate its usefulness. Then, make sure that you are clear on what is required for a successful implementation. Lastly, properly plan and execute on it.

4. Not creating documentation

We’re not talking about User Manuals here. We’re talking about customized documents for every transaction and process you execute throughout the system, from GL entries to system backups. While these procedures are time consuming to create, their value in insuring consistent processes and results is invaluable. In addition, they make great training references for new staff as well as reference guides when filling in for someone on vacation.

5. Inadequate Training

Whether it’s a new system or a new version release, learning how to fully use the system insures optimal return on investment.

6. Overly Complex Systems

A nonprofit with a single revenue source and a single program area may be able to use a fairly simple system like QuickBooks. However, as transaction and reporting complexity increases (allocations, cross fiscal year reporting, multiple Net Asset classifications, etc.) the need for a system that offers those features and benefits increases.

Conclusion

The dialogue on Linkedin brought to mind some favorite comments heard in this industry.

Here's our top six:

6) - “I’m not too concerned about reporting.  I do most of mine on Excel.” (The same ones you designed on VisiCalc?)

5) - “I won’t need any help implementing, I’ve done several.  In fact, I’ve implemented three different accounting systems here in the past 5 years!”  (Say no more)

4) - “We won’t need to involve any staff in the process. I’ll tell them what to do and they’ll do it.”  (The beatings will continue until morale improves)

3) - “We don’t need any SOP documentation. It’s all up here (points to head).”  (While I prefer to use “what happens if you win the lottery” scenario, staff keep referring to an unfortunate bus incident…while smiling).

2) - “Just show me how it works and I can teach everyone else what to do.”  (Because nobody knows their job better than you, and you obviously have tons of free time.)

And #1) - “I’d like to keep my chart of accounts/vendor coding/employee ID because that’s the way we’ve always done it!”  (And that explains your wardrobe)

Yes, intense planning, procedure review (including staff input), training, documentation, and a willingness to accept change are critical components of a successful implementation. Software itself will not fix broken business processes, but it will often bring them to light!