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Selecting an Optimum Nonprofit Financial Management System By Mano Koilpillai, MBA, CPA

One of the key cornerstones of a nonprofit’s sustainability is its financial management system. There was a time when this was an area mired in paper, but now technological innovations have led organizations to a place where software and new procedures can allow for a modern, financial system.

However, selecting a new financial management system can be overwhelming – especially when an organization strives to be efficient as possible with its resources. In the long run, a new system will provide more flexibility, reduce errors and fraud risk, and ensure long-term financial stability for the organization.

The selection of a financial management system is complex because of the breadth of functions it encompasses, which typically include many, if not all, of the following:

  • Accounting
  • Budgeting
  • Payroll
  • Accounts Payables and Accounts Receivables
  • Cash Management
  • Investments Management
  • Security/Risk Mitigation
  • Fixed Assets and Inventory
  • Grants Management

 

The first step in a selection process of an enterprise system would be to consider the following key questions:

1. What size is the organization?

  • Revenue
  • Number of employees
  • Volume of expense transactions


2. What is the preferred platform?

  • Web-browser based
  • Windows
  • MacOS
  • Linux
  • Mobile: Android
  • Mobile: iOS


3. How many funds and/or grants does the organization manage?

  • Less than 20
  • 20 – 50
  • 51 – 100
  • More than 100

 

The second step is to evaluate the strengths and weaknesses of the current system to include the following key areas:

  1. Data capture and multi-dimensional tagging
  2. Reporting capabilities
  3. Processing speeds
  4. Flexibility of the system to add modules and desired functionality

 

The third step is to identify enhanced or new requirements for a new system. This could initially include:

  1. Identifying the broad category of system that the organization initially thinks it needs (prior to performing a formal requirements assessment):
    • Small nonprofit system with very basic features
    • Mid-level nonprofit system requiring industry-specific features
    • Enterprise level nonprofit system with advanced features
  2. Performing a more formal requirements assessment by:
    • Meeting with key stakeholders and identifying their requirements for a new system
    • Mapping out process flows that capture the requirements and the related system components

 

The fourth and final step is to review the current landscape of available systems that meet the requirements established in the previous step. Then the organization can develop and release an RFP to engage a vendor with the right mix of experience and customer support.

A new financial management system can go a long way to support the efficiency of a nonprofit’s operations and ultimately its sustainability. Specifically, a new system can provide:

  • Seamless access to financial data
  • Improved efficiency, performance, and effectiveness
  • Enhanced security of the organization’s data and confidential information
  • Improved transparency and accountability
  • Automation of time-consuming financial processes and optimization of workflows
  • Real-time visibility into financial and operational data
  • Lower IT costs and reduced technology risks
Mano Koilpillai is the President and CEO of Dynamic Consulting and Accounting, LLC. She has more than 30 years of financial management experience that has crossed industries including nonprofit and association, Big 8 consulting, Fortune 50, and government.

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