There has been significant interest in reviewing or replacing finance systems amongst charities recently. The introduction of HMRC’s ‘Making Tax Digital’ (MTD) has prompted many organisations to review their systems. It is also possible that many finance system reviews had been put on hold during lockdown. This article examines some of the key factors that any charity should consider when reviewing their finance system.
How do you decide you need to replace your finance system? Often this decision is driven by the recognition that your charity has outgrown its current finance system and there are major limitations that are holding back your organisation. The most common shortcoming of finance systems is the inability to provide adequate analysis and project coding.
Requirements
How do you evaluate your current system and any potential new ones? It is important not to get bogged down with the minutiae of all the functionality you need. Focus instead on the handful of key areas that need to be delivered. Look first at the ways a new system can reduce the admin workload of your staff, secondly look at the outputs your team and senior leadership need from the system.
Reducing data entry workload
Modern finance systems can frequently deliver significant improvements in data entry and streamlining workflow. Ensuring that data is only ever entered once, that validations reduce the chance of errors.
Improving the timeliness and quality of data
The most important function of a finance system in any organisation is the production of accurate and timely data for decision making. The two most important factors in improving data quality and timeliness are extending analysis and project coding and cutting out the use of spreadsheets in the reporting process. If you cannot analyse your data by project, fund, restriction, cost centre and programme (for instance) then you are forced to add the extra analysis in spreadsheets. This drastically increases the time needed to deliver meaningful reports, it also increases staff time needed and the risk of errors in the data.
Resourcing
Before you get your new supplier in to start implementation you need to do some work on Chart of accounts and analysis and reviewing finance processes (especially processes that involve other teams e.g. the fundraising finance processes). Consider what new processes might be brought in as a result of having the new system (which perhaps were not possible or at least not easy with the old system, such as purchase ordering or giving budget holders more direct control of their budget/forecasting process. Carefully consider the change management implications of these new processes.)
Suppliers and systems
Now is an interesting time to be looking at finance systems. Of course, there are hundreds of accounting systems available in the UK but I am focusing on those that have made a conscious effort to address the requirements of the charity sector and who have sales and implementation teams that understand the sector.
Modern finance systems split broadly into two groups, those that are hosted by the supplier (or a third party) and those that are ‘true’ cloud products, built from the ground up as browser-based systems, with no requirement to download any software onto devices and with apps for use on tablets and smartphones. There are six products in the latter group that I want to mention here. This is not – of course – because they are the only or necessarily the best solution for your charity, but because they represent a new breed of software that if implemented well can significantly improve the performance of your charity. These (in alphabetical order) are: AccountsIQ; Aqilla; Iplicit; LibertyAccounts; Xero and Xledger Lite.
Finally – of course – talk to your contacts and colleagues across the sector about their experiences. Talk to as many people as possible. Do not rely on one good or bad reference to make a decision. All finance systems, however good or bad, will have their supporters and critics and even the best systems can be ruined by a poor implementation!
Adapta Consulting is a small consulting firm that works only in the not-for-profit sector and is completely supplier agnostic. They cover all aspects of information systems and management. Helping organisations select a wide range of core systems such as CRM, finance and HR. They also help develop IT and digital strategies and support organisations with all their data management, data protection and information security needs. For more information see the website at www.adaptaconsulting.co.uk.
*The views expressed are the author’s and not ICAEW’s.