6 Things to Consider When Assessing Your Nonprofit Technology Infrastructure

How often do you assess the systems that drive your organization? Have governmental regulations changed reporting requirements forcing you to rethink your data and financial management? Does management have the analytics and insights they need to make decisions? Are you tracking relationships and affiliations of major donor prospects? How dated is your technology?

People, processes and systems are the lifeblood of your nonprofit. Your systems’ capabilities affect the processes carried out day-in and day-out by your trusted staff, managers, board members and volunteers. Focusing on the systems, there are six areas of consideration for assessing your nonprofit technology infrastructure that directly affect the overall management capabilities within your organization:

1. Fundraising: Donor management solutions are designed to improve the process of collecting key data on donors, revenue, events and the like, while providing thorough reporting capabilities. There are key areas that should be reviewed and considered before upgrading/selecting a solution and making an investment.

• Must-Haves: Determine what data your organization needs to track. Some focus efforts on direct mail communications, pledges by annual campaign and volunteer tracking—while others focus on grant revenue tracking, tracking honor/memorial gifts and tracking annual events. These focus areas help you begin a realistic search for a donor management solution that fits your needs.
• Future Goals: Identify business practices or fundraising initiatives you wish to implement in the future. These might include fundraising dashboards comparing campaign ROI, auto-email donation receipts or online form integration. Your future donor management solution should encompass both your “future goals” and “must-haves” to round out your relevant features.
• Centralize Functions: Assemble all your relevant features under one roof. A centralized solution not only impacts those within your organization—from managing/upkeeping fewer databases to streamlining staff responsibilities to simplifying annual licenses/maintenance/training—but also, with localized data, such as donor demographics, donation details, etc. and cross analysis reporting (i.e. donors who have more than 30 volunteer hours this quarter) you and your team have the information you need to move your organization forward.
• Cloud or Network: Determine which solution is a better fit for your organization: cloud-based or network-based. A cloud-based solution is a database that is accessible through an Web browser and can be accessed on any Internet-connected computer or device. A network-based solution is a database that is installed directly on your organization’s internal network and can only be accessed on computers where the software is installed and configured.
• Timing: When is the right time to make a donor database investment? Be mindful of major events when putting together a migration and training timeline. These events—key staff vacations, annual campaigns, year-end—impact an organization-wide database change.

2. Accounting. The right accounting software can help improve operating efficiencies and provide competitive advantages. Spending time to select the most appropriate accounting software for your organization will enable you to manage your organization more effectively and efficiently, saving time and money.

There are several key factors in determining the right nonprofit accounting software. Among them are:

• Features and Functionality: If a system does not have the features and functionality you need, nothing else matters. Of particular importance to a nonprofit is the automatic balancing of your funds along with tracking of net asset restrictions. Other features typically important to nonprofits are budgeting, purchasing and paperless features. Taking some time to assess your business requirements will help ensure your new system fits your organization’s needs.
• Deployment: Traditionally, there are two methods of deployment: on-premise and online/cloud. An On-premise deployment means the software is installed on your server and accessed through your local area network. On-premise requires there be some computer infrastructure in place and some level of expertise available to install and maintain the system. Online cloud deployment is accessible via the Internet from anywhere at any time, and is typically a lower-maintenance option.
• Payment Model: The most common choices are an outright purchase versus subscription. With a purchase, there is typically a larger one-time, up-front payment, but no additional payments. The subscription model consists of a smaller fee billed monthly or quarterly as long as you are using the system.
• Employee Access: Many systems allow managers or other staff to access the system to perform various tasks: entering and approving requisitions, running reports, entering and approving time sheets, etc. Such access can have huge benefits to your organization's efficiency. Look for a system that can accommodate these special access needs with a lower-priced user license as well as some security mechanism for restricting what accounts, departments or programs a user has access to.
• Total Cost of Ownership (TCO): Cost should not be the most important factor to consider. But certainly, when analyzing all other factors listed here, cost should be part of the equation. And, make sure you look at the Total Cost, which includes software purchase or subscription fee, ongoing software maintenance and support, training and other consulting costs. Extrapolating these costs out over a five-year span can serve as a good comparison between systems.

3. Working in the Cloud. Cloud solutions offer organizations the technology needed to improve their efficiency, effectiveness, operating costs and visibility. According to the most recent surveys—"Global 2012 Cloud Computing Survey" from TechSoup and Nonprofit Technology Network (NTEN), "2012 State of the Nonprofit Cloud" from Nonprofit Technology Network (NTEN)—90 percent of nonprofit respondents indicated using some type of cloud technology.

As organizations adopt cloud solutions, it often paves the way for more, with 80 percent reporting they use more than one cloud solution for non-critical applications like email, project management and video conferencing.

Moving to the cloud has many known benefits, but there are three critical things you should know when researching cloud solutions for your organization. The answers to these questions are critical because if the cloud solution is not designed for nonprofits, all benefits go out the window. (Details in this white paper: "7 Compelling Benefits of Cloud Computing and the 3 Most Important Facts Every Nonprofit Should Know Before Purchasing a Cloud Solution.")

4. Payroll. “Bringing payroll in-house saved us thousands of dollars a month!” one user told me recently. Labor is the No. 1 cost for most nonprofits, and yet many nonprofits use a patchwork solution to handle it. They overpay for outsourced payroll services and still need to manage much of their labor reporting manually, because the payroll service can’t provide what’s needed.

A key requirement of nonprofit payroll is tracking total labor cost and hours to multiple contracts, grants or other funding sources, including benefit and employer tax expense. Most payroll services can’t do it or charge per unit costs for each charge, making it extremely expensive.

Alternatively, nonprofits often only process basic payroll through the service and rely on paper or spreadsheet timesheets to track labor distributions and allocate the expenses by hand. The final step is posting the results to the accounting system for reporting purposes. This option adds multiple layers of manual labor that are time consuming, costly, difficult to audit and potentially fraught with errors.

Current technology solutions provide a front-to-back integrated solution where employees enter their distributed time. The payroll module calculates taxes and benefits, posts all expenses and liabilities to the accounting system and provides the payroll manager with all reports for required filing.

A well-designed integrated solution will:

• Provide web-accessible timesheet entry for your employees with built-in approval steps
• Track all benefit expense by labor distribution
• Handle multiple pay rates
• Handle multiple Workers Comp classes
• Provide EFT processing including two or more splits
• Provide clear reporting of all taxes payable and integration with Accounts Payable.

The general experience is that your staff is already doing all the work! Bringing payroll in-house frequently reduces processing costs and increases flexibility, timeliness and accuracy of reporting.

5. Financial Reporting. Objectively looking at your organization, what reporting requirements are being met efficiently and what need additional manipulation? Can your system be customized to easily capture the data you need to round out all your financial reporting requirements? “Nonprofit Reporting is an organization’s best insight into their financial position, grant management and program effectiveness,” explained Peter Stam, president of AccuFund. “With better insight comes better decision making and better tactical execution."

In a recent survey of nearly 300 nonprofit professionals conducted by NonProfit PRO, more than half indicated struggling with reporting non-financial performance data. Additionally, the overall majority don’t enjoy the automation of reporting, with 73 percent spending up to five hours a week manipulating data outside their financial system and 27 percent spending more than six hours per week.

This reporting bottleneck can’t be solved by manual intervention, indicated by the 95 percent of respondents who reported having fewer than five accounting staff members. Is your staff’s productivity constrained by spreadsheets and manual/paper-based processes that lack automation and scalability? Start the process of improving your organization’s financial reporting capabilities. The white paper “Reporting on a Mission” highlights the following:

• Best practices for requisite, encumbrance and performance reporting, plus allocations and budgeting capabilities
• Overcoming reporting bottlenecks and reporting your accounting system should be able to do for you
• Benefits of reporting accessed directly from your accounting system

Better decision-making and tactical execution can become a reality with efficient and effective financial reporting. It’s the foundation for building a strong organization.

6. Paperless Capabilities. The movement toward a paperless organization doesn’t have to be one giant leap forward, but rather many, smaller steps. The key is identifying manageable areas of focus within your organization that can save time and money, reduce errors, provide better document security and help save the environment. What is an organization’s biggest challenge when going paperless? When we surveyed webinar attendees, the overwhelming majority (63 percent) listed “Prioritizing Paperless Options.” Additionally, there are many potential areas to consider, and “Not Knowing Where to Start” came in a not-so-close second (21 percent).

There are three categories that every nonprofit can use to assess the areas within the organization where a significant reduction in paper and electronic processing could save time and money. Detailed in the white paper “Going Green and Saving Green: Operating a Paperless Nonprofit,” the three categories are (1) papers coming into your organization, (2) papers going out of your organization, and (3) papers being shuffled within your organization.