Choosing the right financial management system can often feel like a minefield. We explore some of the potential solutions and provide a brief guide to making the right choice
This article is sponsored by Sage Intacct – the modern financial management solution with open APIs to streamline grant, fund, project, and donor accounting while delivering real-time visibility into the metrics that matter. Sage Intacct helps nonprofits strengthen stewardship, build influence, grow funding, and achieve mission success
It’s difficult being a financial leader in a charity today. You’re expected to balance increasing complexity with the need for speed, compliance, and transparency. Stakeholders expect quick and accessible financial information – and the monthly financial check-in isn’t usually enough.
And that’s only the start. Charities tend to receive money from multiple sources, many of which come in different forms with different conditions. They may receive the usual one-off donations, long-term donations, legacy giving donations, funding from various government and non-government bodies, income from commerce and investments, and much more.
Being open and transparent can prove difficult with so many variables, particularly when attempting to comply with ostensibly ever-changing regulations.
Today’s charities need a robust financial management system. They need to set up a system that tracks and makes visible all incoming and outcoming funds. They need an effective financial management system that provides complete fund tracking, efficient operational processing, timely reporting, real-time analytics, and much more.
That isn’t easy. Charities face the problem that a lot of financial management systems are outdated, even archaic. They are not built for the age of speed. They do not meet the demands of our ever-connected world. Simply put, a lot of systems don’t really work.
Charities looking to upgrade an old system, or switch to a different system, or even implement their first ever system need to consider all that is on offer. They need to look at the market, explore the types of solutions available, and pick the financial management system that works best for them.
The first step to choosing the right financial management system is by looking at the delivery model. That means exploring solutions. Sage Intacct has recently released their Buyer’s Guide 2021, which shows three prominent models, all of which we will explore detail below.
Charities and businesses will be familiar with these. On-premise options allow charities to licence software and run it on their own servers, affording plenty of customisation options and the ability to have a system that unique caters to your needs.
Charities should be aware of the hidden costs that are sometimes associated with on-premise solutions. They should remember to account for deployment, operations, support, customisation, integration, maintenance, and anything else that may need costing.
On-premises solutions are traditionally better suited to larger charities, as they favour teams with investment capital, IT infrastructure, and in-house expertise. For smaller charities, such solutions can be complex and the return on investment could be lower than other options.
Hosted solutions typically consist of software that physically resides at a remote data centre. The data centre usually belongs to a third-party provider, who gives charities remote access to the software through the internet.
Hosted solutions eliminate the responsibility of hardware and the need for an expert in-house IT team. The solutions also circumvent the demands of large expenditure in the short-term.
But costs can still ramp up, as charities have may have to fork out for customisations, upgrades, integrations, and other support and services as required.
Hosted solutions may be most useful for charities that are expecting to grow, the ones not yet ready to purchase on-premise solutions but requiring more services as they grow.
Cloud-based financial applications, also known as software as a service (SaaS), are built for the age of the internet. These solutions are usually paid for on a subscription basis, which allows charities to avoid long-term commitments and excessive upfront fees.
Cloud-based solutions work by allowing charities to unlock data in the cloud while working from a shared system. They are based on using a single set of resources, application infrastructure, and a single database. Upgrades are usually made at no additional costs and many customisations are simply included in the next upgrade.
One concern is the potential for increases in subscription fees, particularly when based on costs per user, which can prove difficult for charities with lots of users. That is an unusual occurrence, however.
Cloud-based solutions tend to work for charities of all shapes and sizes, but are perhaps best for small-to-medium-size charities that hope for cost-efficiency and simplicity.
The cloud offers charities several key advantages when choosing financial management systems. The first and most obvious is the cost, allowing charities to avoid upfront expenditure and ensuring that they distribute funds to the most effective avenues.
The cloud also broadly allows for more agile working, with applications that are easy to implement, configure, and update.
That is particularly important during COVID-19, as charity employees shift to remote working. The cloud allows access from anywhere, from any device, which offers the advantage of flexibility. All you need to access the cloud is a web browser and an internet connection.
Another advantage of SaaS or cloud-based solutions is the heightened real-time visibility, which can be hugely beneficial for finance charity teams. Many cloud-based solutions are able to access, analyse, and present massive amounts of data in real-time, which allows finance teams to stay up-to-date and also provides stakeholders with greater visibility.
The cloud does have some downsides, however. Cloud-based solutions are arguably less able to deal with complexity than some on-premise solutions. On-premises solutions can prove useful for charities with extensive customisation needs, or charities who want complete control over the rollout of the service, though some cloud options can meet these demands.
In addition, charities who have a business model that favours the one-time expense, rather than ongoing expenditure, may also prefer the on-premise solution.
The final element worth consideration is cyber security. Many charities may feel more comfortable keeping cyber security in-house with on-premise solutions, rather than effectively outsourcing cyber security to a third-party.
As with every choice of system, charities need to find the solutions that work best for them. That means finding the right financial management system to meet your needs.
To start, charities need to define their goals. Perhaps start by asking yourselves some broad questions, highlighting the main frustration points, and gaining an understanding of what you’d like your financial management system to achieve.
Once you have established your goals, you’ll be ready to find the best solution for your charity. That will require further research, finding the financial management system that meets all your desired criteria. That might be quite complicated. You may well need a checklist.
Sage Intacct have released their Non-profit accounting software buyer’s checklist, which gives an overview of 40 essential features of a modern accounting system.
The checklist is split into sections, allowing your charity to prioritise. The sections include flexible financial processes, financial insight, cloud architecture, and more.
You can download the checklist below and use it when deciding on your financial management system.
Click to read the non-profit accounting software buyer’s checklist