With so many organizations moving to cloud accounting apps, no doubt you’ve been advised to take a look, too.
The trouble is: when nonprofit organizations implement the advice and recommendations of their auditors, it often results in spending more time and resources on accounting and financial management. So the effectiveness of the accounting often comes at the expense of efficiency.
Auditors are primarily focused on the effectiveness of financial accounting to produce reliable, high-quality financial information for management, the board of directors, and other stakeholders.
But as a nonprofit, you are probably looking for something that increases efficiency as well as effectiveness.
- Having sharp people in place, and
- Giving them the necessary tools and the right technology to do their jobs well
Technology-wise, several top cloud computing apps tick all the boxes. Three of these are detailed below…
This a full-service accounting software package – without the software to install. It includes general ledger, financial statements, AR, and AP functionality.
Xero is 100 percent cloud-based and was built for the cloud from the ground up, rather than a desktop product that came out with a cloud version as an afterthought.
It doesn’t have as many bells and whistles as some not-for-profit-specific packages, but does have some cool features at a fraction of the cost.
For instance, it has a tracking feature that allows you to segregate your financial statements into categories based on your organization’s unique reporting requirements (tracking activities by function, grant, or net asset class).
It also offers customized financial statements, which are great if you want to move line items around and add various subtotals without having to make changes to your chart of accounts.
This cloud accounting app takes the hassle out of traditional accounts payable processes. You can set up different levels of users with different privileges to process or authorize transactions.
Invoices are housed within bill.com, which makes the approval process a breeze for check signers who are not on site. Historical data, including source documents, are easily accessible online.
The app also offers several accounts receivable benefits, including:
- It allows a nonprofit to issue invoices to customers online and collect electronic payments into its checking account; and
- The ACH payment feature allows you to collect customer payments online for a flat fee of 50 cents – without the hefty 3 percent transaction fees that can accompany credit card payments.
This cloud accounting app is similar to bill.com but designed specifically for expense reimbursements and credit card reporting/substantiation.
Employees use the online platform to scan receipts and document the business purpose of their charges. Manager-approved expense reimbursements are provided via direct deposit to employee checking accounts.
General efficiencies with cloud accounting apps
Each of the above cloud accounting apps comes with their own smartphone app. They are very affordable, with Xero starting at $9/month, bill.com at $29/month, and Expensify at $5/month.
If configured properly, each of these apps should pay for itself through increased productivity. Set-up costs will vary if you hire a consultant. However, each program is somewhat intuitive, so you may be able to set it up on your own.
You can use any of the above apps as a standalone product or integrate them so that they ‘talk’ to each other, thereby creating an integrated accounting technology ‘eco-system’.
Some of the additional potential benefits include:
- Ability to cut down on expensive square footage occupied by filing cabinets;
- Not having to worry about the loss of data (e.g. due to server failure) or records (e.g. due to fire or natural disaster); and
- Usage in a virtual office and/or with a mobile workforce.
On this last point, as an auditor I am always thinking about good internal controls and separation of duties. This is especially important with approvals of vendor invoices and employee expense reports. However, it can be challenging if check signers are out and about, or rarely in the office.
For example, nonprofits often require that the executive director’s expenses are approved by a member of the board of directors. Since board members tend to not be on staff, getting approval on the ED’s expenses can be logistically difficult. This can lead to delays, frustrations, and awkward situations.
Bill.com and Expensify can help facilitate the normal checks and balances and multi-layer approvals processes that comprise an effective system of internal control, without the logistical headaches that sometimes accompany traditional methods of expense approval and payment.
Need assistance with choosing the right cloud accounting app? Contact us and we’ll do our best to make sure that the app you choose not only increases effectiveness – but also efficiency.