Finance software for charities: practical advice for those thinking of changing

Ever since the pandemic, many charities have been conscious that their finance systems and workflows could use some improvement. At the height of that crisis, a lot of nonprofits realised they could not work as effectively as they should when away from the office.

Perhaps even more importantly, many discovered they could not produce quality financial information at short notice when it was urgently needed to inform decisions. Covid may have receded as an issue, but with a host of other pressures facing charities, it is important to have systems that avoid waste and provide good data.

Here are some lessons from iplicit’s whitepaper Changing Your Finance System: A Toolkit for Nonprofits, courtesy of charity finance expert Mark Salway.

Signs that it’s time for charities to change finance software

A well-functioning finance department minimises the time spent on low-value activities such as processing transactions and rekeying data. Instead, the system produces meaningful financial management information from which people can draw insights.

Some signs that it’s time to change include:

• You’re using physical systems which store information on local servers – an arrangement which comes with data risks and maintenance costs.
• The team have to rekey data because systems don’t talk to each other – taking up valuable time and increasing the risk of human error. Red reminders about bills are warning signs, as are grumbles from staff about the system.
• You’re not sure if you would spot mistakes or fraudulent activity. There may be very limited ability to control user access to the system or segregate the duties of different staff.
• You don’t get good management information in a timely fashion. A good system would enable you to deliver meaningful data within 5-10 days of a month-end close, presenting actual figures versus the budget and providing meaningful forecasts. We know that a whole month to close is not unheard of in the charity sector.

Researching your options

The work of a charity’s finance team can be represented as a pyramid, with five levels to it. From the top down, these are:

• Financial governance: The oversight by trustees and managers.
• Financial strategy: The setting of the organisation’s direction by modelling different scenarios and business models.
• Reporting and management information: The production of timely and relevant data formatted to the different needs of users.
• Control environment: The systems that make sure assets are not at risk from error or fraud.
• Transaction programming: All the basic work of the department, which should be made as simple and efficient as possible.

When assessing how well the existing finance function is performing, it is worth asking the basic question: what do our team spend their time on?

Doing a gap analysis

The hunt for new software will go a lot more smoothly if you’ve clarified exactly what you’re looking for.

It makes sense to start with a gap analysis.

That means working out where your finance department is now, where you want it to be – and what the differences between those scenarios are.

To create those two pictures, you can analyse each key process in the finance function and ask: what works well and what could be improved? That applies to people, processes and technology.

You should also get clear about what you require from a new system. Make sure you document those requirements and rank the importance of each, so you can ask vendors to demonstrate how their systems will meet your needs.

Ask yourself what kind of analysis and reporting you will need from the new system. When vendors demonstrate their software, ask whether it will “slice and dice” information and projects in different ways.

You need to involve a broad group of stakeholders in this process, including trustees, managers, fundraising, operations and support as well as finance. The process will go better if they are fully involved and understand the need for change.

Implementing new finance software for charities

The process of implementing new accounting software will go more smoothly if it’s planned well and if it’s not all left to the finance team.

You will need to pick an internal team to handle the process, bringing in people from throughout the organisation. If you’ve quizzed the vendor about implementation, you should be dealing with people who understand your requirements and concerns.

Part of the process is data cleaning – the potentially liberating experience of creating a new chart of accounts to begin with.

Another is user acceptance testing and training. Staff should be free to work with real data in a “sandbox” environment before the system goes live, so they can learn without breaking anything.

But it’s important to bear in mind that the “go live” date is not the end of the process. The best performing organisations don’t just create an improved version of what they had before. They keep pushing and improving until the system is really fulfilling its potential.

Learn more

To find out more about planning a change of software, download a copy of Changing Your Finance System: A Toolkit for Nonprofits, published in association with Mark Salway.

Or find out more about our charity accounting software and the nonprofit clients we have helped.