There’s a lot of talk about robots taking the place of accountants. An increase in automated accounting firms have caused a stir in the industry and many are wondering if this is a new way to do business. While some businesses may benefit from having a rinse and repeat system to doing their books with no conversation, I would say most nonprofits wouldn’t benefit from this type of service. I’ll also go on a limb and say that this business model still has a long way to go. Insert the ScaleFactor fiasco.
The nonprofit industry is special and requires care. Not only is it heavily regulated, There is a level of strategy and involvement needed that you will not get from an automated bookkeeping service. Don’t believe me? Let’s dive in!
When it comes to your accounting needs, here are the 3 A’s for evaluating your options, followed by some sage advice.
Assess
Determine the level of involvement, communication, access, and what you will need from the team managing your finances. Start asking questions. Initially, what is the primary goal and would a solution that is fully automated work for you? Secondarily, you want to think about the complexity of your accounting. A few questions to get you thinking below.
What can be automated?
What processes might you need assistance with?
In what instances would you require feedback and strategy?
Are you comfortable running the account automation?
When your tax accountant or funder has questions about how the financials, who will be responsible to answer?
When the auditor wants to discuss how certain things are booked? The methodology around cost allocation? Are you even allocating costs correctly? What are reasons behind classification decisions? How will you respond?
Does this technology solution meet all our needs or only some of our needs?
How does the solution assist if/when you are going after financing terms, lines of credit and loans? Will the system correspond with the loan officer's questions concerning year-over-year changes in categorization?
Is there any element of management or consulting included in this solution? Is there someone to defer to if you are unable to speak as it relates to the finances in your organization?
How is the tech support for the technology—do you have a dedicated account manager? Do they focus on technical or financial solutions? Only maintenance?
Does this solution aid and stand alone for annual audits?
Does this technology help you go after, achieve and retain additional funding?
I know, I know. It seems like a lot but these are the things you have to consider when you are deciding whether an automated bookkeeping solution will work for your organization.
The decision to automate is an easy one. Everyone wants a support solution and a system that JUST WORKS! If you are not automating where you can, you are probably missing out. What I want you to consider is that tech enhances but it does not replace a person.
Assign
You have assessed your unique approach in the non-profit space and the nuances important to your organizational maintenance. You have decided to automate where you can, but what can you automate?!
Many of the automated accounting systems and tech solutions focus on the compliance piece—considerably basic bookkeeping. If your accounting is complex and requires more than basic bookkeeping. Based on our assessment questions, you might want rethink full automation if that was your initial direction.
Outside of compliance, let us look at other approaches that your accounting might require.
Managing grant accounts separately
Managing multiple grant programs simultaneously
Grant allocations unique to each grant (i.e. custom rules)
Cash flow forecasting
Budget preparation and maintenance
Preferred methodology
Cost allocation
A lot of my clients are way beyond basic bookkeeping. Even when it comes to categorization of transactions, there is a significant level of complexity there because they are managing multiple grants and multiple programs. There is a methodology for how each organization handles their accounts, and many systems do not offer complex macros, rules or allocation automations that are sufficient for nonprofits.
Typically, someone is steering the ship. Someone is making decisions on what is happening, what direction the organization is heading, what they are not allowing or approving, and defining how they will efficiently and consistently manage the different facets of accounting.
While we lean on tech and automation to assist and improve our services, reduce errors, and streamline where possible, that’s only part of the process.
Advice
A piece of advice. My secrets are spilling out all over the page. Now you know that tech falls short when it comes to consulting and that these automated bookkeeping tools are not industry specific. If you have been in the nonprofit space for a minute, you know that there are very specific ways to manage your accounting. There are rules and regulations that you must abide by and funders REQUIRE those specifics from you.
Focus on the set up.
Focus on ensuring that you can book accounts and expenses properly.
Focus on solid accounting.
Focus on supplying your donors and funders with correct and precise financials.
Focus on building their confidence in your organization.
And I KNOW that sounds like a whole lot of extra things to focus on in addition to your day job.
And if that is the case, maybe you should focus on finding a hybrid solution like Visionary Accounting Group.
I am an advocate for the role of a controller in most size organizations. It is a critical role to employ someone who brings vision and solutions to your team, who streamlines processes and takes accountability for all things financial. Whether you are the Executive Director or the lone bookkeeper, we provide a team to run your accounting function.
We love tech—we use a lot of it. I am a fan, but not at the expense of your organization. Do not let the shiny tech distract you with big promises. Avoid allowing the “economical” solution to be a detrimental one because it does not the support what your organization requires. Ask all the questions. Think long term; think unforeseen issues; think worst-case-scenario. In the long game, what is the best solution for your organization and how do you want to manage your organization's finances going forward?
When you are choosing whether to automate or to partner with a consultant, choose to partner with a group that can provide both tech AND consulting solutions, and who will aid in the financial management of your organization.