5 Considerations Before Integrating Nonprofit Financial Systems

Nonprofit professionals recognize the value of investing in top-of-the-line software systems to collect and store data. So, after 20 or so years of hard work on an existing database, technology advances dictate that it may be past time for an update. The only problem is that many of these great best-of-breed solutions don’t integrate well with other systems.

Specifically, this becomes problematic when your database doesn’t integrate with your nonprofit’s general ledger. Over the years, your organization’s staff members may have become used to a clunky system that didn’t do much compared with the systems of today. However, that old system did integrate well with the general ledger, making it easier to transfer information and data between your development and finance teams. Investing in a new system may mean that your staff members will need to trade improved database technology with manual processes to get financial data to the general ledger.

Even if your organization’s shiny new best-of-breed database system has all the bells and whistles (and even some built-in apps and integrations), if it doesn’t seamlessly connect with your financial system, you’ll be left with a lot of interdepartmental drama.

This article covers some of the considerations you should think about as you invest in a new system and set up the needed integrations between development and finance. These considerations include:

1.  What does your finance team need from the fundraising revenue system?
2. What business processes should you adopt to ensure reconciliation?
3. How often should you sync your fundraising system and general ledger?
4. Will you need to manipulate data for an effective synchronization?
5. What else should you know about “best of breed” software integrations?

While this guide only scratches the surface of considerations related to nonprofit software integration, it can open up discussions with your teams and act as an entryway to the research necessary to decide how to proceed with the best possible outcome moving forward.

1. What Does Your Finance Team Need From a Revenue System?

Your nonprofit’s finance team is responsible for ensuring all financial information is reported according to generally accepted accounting principles and provides the data necessary to keep the organization’s leadership, governmental agencies and auditors up-to-date. Because data for financial reports are pulled from the general ledger, your general ledger needs to include all relevant information from other systems, such as your CRM and fundraising software solutions.

Therefore, it’s important to sort out what is considered relevant to your finance team. Standard fundraising gift  data, such as the date, purpose and amount of a donation must (of course) be included. However, there are other data that may or may not be available from the revenue system in standard fields. The goal is to learn where this data should live without “upending” the revenue system or forcing the development team to work with non-standard and unfamiliar structures, coding or distributions.

2. What Business Processes Should You Adopt to Ensure Reconciliation?

Ensuring reconciliation between your revenue solution and general ledger is one of the most important aspects of proper integration. Your revenue system will be seen by the general ledger as a subsidiary ledger, and not without reason! This means that the details in your revenue system/subledger should “tie out” to the activity found in your general ledger. Tying financial activity together between the systems ensures that all fundraising transactions during any period and on any account are accounted for, creating an audit trail to support the general ledger.

Have an honest discussion with your teams to determine what processes are necessary to ensure this tracking of activity occurs and who will be held responsible for owning that effort.

3. How Often Should You Sync Your Revenue System and General Ledger?

Frequent synchronization is necessary to ensure your general ledger is up-to-date with the latest financial information from your revenue system. Daily syncs are certainly the best practice. However, this frequency may not be necessary during times of low volume. Another option is to post to the general ledger every time there’s a bank deposit, ensuring all of your organization’s data corresponds with the most up-to-date bank account activity. This method may require different frequencies depending on the organization — it may be multiple times per week or even multiple times per day. And don’t forget, non-depositable transactions (e.g. pledges) need to be posted on a consistent basis that supports reconcilability.

Frequent posting to your general ledger results in additional transactions for reconciliation. However, it also reduces the opportunity for error and removes the “needle in the haystack” syndrome that occurs when you post less frequently (like monthly).

4. Will You Need to Manipulate Data for Effective Synchronization?

If your standard fundraising system outputs don’t include the correct information needed by the general ledger, or if that data is not formatted correctly, you may need to manipulate the data to make it usable by the finance team. When considering the data files generated by your revenue systems, ask yourself:

• Are the correct fields included?
• Are they in the correct order?
• Do columns or rows need to be changed?
• Do you need to add a header row?
• Are there unnecessary rows or columns that need to be removed?
• Does the file need to be converted (Excel, CSV, XML, etc.) before being imported to the general ledger?

If your data needs to be manipulated, list out exactly what it is that needs to be done and decide who will own the responsibility of doing it. Then, based on that information, put in place the necessary controls to reduce the risk of errors and reconciliation issues.

Depending on the systems you use, this process can be greatly simplified through the use of automated crosswalk software. This type of software effectively integrates source financial information (e.g. from your fundraising system) into your accounting system, and ensures that no one on your development or finance teams will need to manipulate any data. This means no adding or deleting of rows and columns, no converting files into a different format and no manipulation of the numbers, for example, to summarize account totals. These systems save tremendous amounts of effort and time while at the same time ensuring accuracy.

5. What Else Should You Know About ‘Best of Breed’ Software Integrations?

Investing in “best of breed” technology is a reasonable and rational move for nonprofits because the technology does exactly what it’s designed to do and what needs to be done at the organization. Managing memberships, online giving, events and more is all more efficient with a well-designed solution built specifically for that purpose. However, this switch naturally leads to the need for additional integrations, whether manual, automated or hybrid.

Trusted solutions sometimes need additional integration software to maximize effectiveness and efficiency. That’s why it’s so important to address the considerations mentioned throughout this article — and ensure that your integrations will help alleviate the challenges of data management and leverage the technology at your disposal as effectively as possible. Use them as discussion points with your key stakeholders to get started.