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Integrating Systems to Reduce Financial Risk for Nonprofits

Nonprofit organizations demand a lot from their software. According to a 2015 survey conducted by Software Advice, a company that provides research and online reviews of fundraising software, nonprofits want greater functionality and tools from their investments. Not only that, they want their fundraising/donor management programs and other platforms to work seamlessly together.

In fact, 57% indicated they wanted their donor management to integrate into their accounting program. “We see fundraising, donor management, and CRM systems naturally morphing into a single system that supports all types of interactions with constituents and fundraising activities,” said Janna Finch, Software Advice’s senior market research associate. “There’s a lot of overlap in what these systems do and how nonprofit professionals use them, so it makes sense that this is happening.”

Financial risk—the greatest danger

Systems that work together can greatly increase efficiency and reduce costs for nonprofits. Beyond that, however, integrated systems provide the greater visibility across your organization that is critical to managing financial risk—a significant area of weakness for many nonprofits.

In their March 2016 report, Oliver Wyman and SeaChange Capital Partners define risk as “unexpected events and factors that may have a material impact on an organization’s finances, operations, reputation, viability, and ability to pursue its mission.” And in a summer 2017 article in Nonprofit Quarterly, the professionals at Community Resource Exchange (CRE) discuss a proprietary framework and tool that considers risk indicators and organizational activities across six operational categories.

One of these is financial, which encompasses risk in the areas of financial practices, performance, oversight and controls, monitoring, and reporting. CRE consultants tested the assessment with 10 New York City nonprofits. Finance was identified as an area of higher risk, with oversight and internal controls as the lowest-scoring subcategory.

Technology plays a big part in this area. The Nonprofit Quarterly article notes: “Respondents report that systems between finance and program generally are not integrated, and moreover, that financial reports are not routinely provided to all departments—presumably program included. This lack of coordination and information flow between two critical organizational functions—not uncommon but of note nonetheless—could result in excess spending and unmet contract milestones (and, ultimately, reduced revenue).”

Finding financial clarity in the cloud

Many nonprofits are using cloud fund accounting software such as Sage Intacct to turn their technology liabilities into assets. For example, Sage Intacct:

  • Automates the tracking and reporting of outcomes and performance metrics
  • Makes reporting quick and easy though through point-and-click functionality
  • Provides real-time visibility across the organization through dynamic dashboards
  • Continually consolidates multiple locations and entities
  • Is built with open API for seamless integration to other solutions

The nonprofit experts at JMT Consulting can help you further manage financial risk by designing and implementing a technology solution that works best for the unique needs of your nonprofit. Contact us today to get started.

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