Running Your Own Nonprofit Accounting Software Selection Process
So, you’ve taken the leap and decided to replace your clunky, old accounting software. Your staff has grown tired of the seemingly infinite number of work-arounds, and your funding sources (donors, grantors, etc.) are looking for better reports and a tighter audit trail. What’s next?
Shopping around for a new nonprofit financial management software can be a cumbersome task, especially while you are stuck with your existing system in the interim. Although there are many organizations that specialize in requirements gathering and business process mapping, your budget or timeline may not permit a third party to run your RFP process for you. Here at NonProfitPlus, we try to coach our prospects through the sales process as much as we can. We experience mainly two types clients that are looking to make a software transition:
Nonprofits that have hired third parties to run RFP’s
Organizational Pioneers that experience pain points and NEED change
We enjoy working with consultants when an organization can afford to have a 3rd party run a fair, organized process, but we understand that this isn’t a viable option for all nonprofits. What I most often encounter during our sales process are what I call “organizational pioneers”. These are folks within a nonprofit organization that lead the process for change and business system improvement. Often, this is related to a new person coming into the organization that recognizes the need to upgrade broken, disparate systems with manual workarounds. Organizational pioneers can be found in all levels of an organization, from accounting staff all the way to VP’s and CFO’s.
My goal here is to provide organizational pioneers with a simple, straightforward framework to use during their requirements gathering and software selection process. By doing a quick google search, one can easily find a plethora of templates and resources available to use while searching for the best nonprofit accounting software for their organization. These resources are good, but can often inundate an organization with low headcount and bandwidth and possibly inhibit change from ever occurring. Below, I’ve included some key benchmarks everyone should use broken into:
- Pre-Requirements Gathering
- Business Process Mapping
- Requirements Gathering
- Potential Vendor Invitation
- Vendor Elimination and Selection
You might be thinking; don’t I start by figuring out what we need? Maybe, but I think it is more important to discuss the people involved before jumping into the process. What does this look like? I recommend setting a meeting with every stakeholder that might be part of your software
selection and implementation process, from this point through go-live of the new system. It is important to kick the project off on the right foot, so develop an agenda for the meeting and demonstrate a high-level of organization from the get go. This is especially true if you will need approval for the purchase of the software and services for the implementation. Your job is to sell the need for a project first, then find a solution that fits the need later. One item on the agenda should be to discuss current pain points. What you are experiencing in your role might be very different from what someone else in the organization is going through. This phase marks the beginning of documenting your business processes that can be improved and reengineered.
At this point, you should establish estimated timelines for the project, as well as expectations for how much time the stakeholders will need to invest before purchasing a system and kicking of the implementation.
Business Process Mapping Example
Tip: Ask around your town to see if any similar organizations have recently completed a mapping exercise. Nonprofits love to share with one another, so you may find a nearby organization that is ready and willing to share structural materials with you.
Business Process Mapping
There are various software programs out there that allow you to easily map your current business processes and reengineer them for what you desire future state. If this is your first time around, I recommend mapping your business processes in a shared google doc with the rest of your team. Let’s take a simple scenario as an example. Let’s say that you are currently using excel to manage your expense claims. The “as-is” process might look like this:
- Employee incurs expense
- Employee enters expense into spreadsheet
- Employee prints expense report and attaches any receipts over $25
- Employee hands paper copy to supervisor
- Supervisor approves claim and sends to Accounts Payable or rejects and returns to employee
- Accounts Payable department enters expense and releases payment
- Check is cut and sent to employee for reimbursement
There are no fancy maps here, but this provides a simple documented process of what currently is happening for expense claims and reimbursement. Your future state “to-be” map is your desired outcome after upgrading to a new software package:
- Employee incurs expense
- Employee enters expense into mobile app via mobile device
- Employee attaches receipts to expense receipts via mobile app or pc for any receipts over $25
- Employee submits all receipts on the 15th and 30th
- Supervisor logs into system and approves or rejects expenses
- Once approved, the expenses should automatically flow into the Accounts Payable module for payment
- AP department releases payment
- ACH file is produced and uploaded to the bank for payment to employee
Again, this is a simple “list”, but will help in identifying needs, pain points, and aspects of a new software package you should be looking for.
Now that your team has assembled and you’ve documented your core business processes, it’s time to revisit the outcomes of your stakeholder meetings and business process mapping. Rank your requirements as “must-haves” and “nice-to-haves”. Here are some examples of “must haves” that we see prospects looking for:
- Grant Management Module
- Due to/Due from processing for fund balancing
- A cloud based system, accessible from any device anywhere
- 25 Concurrent users
- Multi-currency accounting
This is an important time to establish all parameters, such as user counts needed, reporting needs, licensing and deployment preferences, etc.
Here are some examples of “nice-to-have’s”:
- Two step approvals for PO’s and Expense Claims
- Board or Auditor user roles/licenses
- iOS or Android mobile devices
- Volunteer Time Tracking
At this point of your requirements gathering and selection process, you can also start to set the budgetary expectations and with your team. As the pioneer pitching this to management or the board, you have enough data collected, processes mapped and people engaged to put a dollar range on what you should be willing to spend to improve from your legacy system.
Potential Vendor Invitation
Once you have gathered your requirements, you are now ready to do some research and find 4 to 5 qualified vendors. Google is a great place to start this phase, but I recommend talking to friends and colleagues within your network to see what other organizations are moving to. In addition to browsing websites, try to find customer testimonials with which you can resonate. Given the amount of information available via the website, you should be able to easily identify a small handful of vendors that appear that they may be a good fit.
Most vendors will ask you to have a short discovery call (15 to 30 minutes) in order to get a better understanding of your business requirements. Since you’ve completed all the steps above, you will be more than ready to share with them what is important to you and what is a nice to have. If the vendor believes that they may be a potential fit for your organization, they will recommend a short demo (1 hour to 1.5 hours) so that you can get a high-level understanding of their product offering and how it can help your nonprofit.
Remember to take good notes during this step of the process, but use your business process maps and requirements gathering documents as a guide throughout the preliminary demos. Also, invite as many people that have participated in prior steps to attend the demos. They won’t be surprised, since you’ve been engaging them from the very start. If you have shared your requirements with the vendor, they should be able to provide you with an estimate for the software license/subscription costs and a range for the implementation.
Vendor Elimination and Final Selection
After reviewing your notes from the preliminary demos, you and your team should be able to identify 2 vendors that you would like to invite back to conduct an in-depth, detailed demonstration. This could be as short as 2 hours or as long as a full day demonstration. Most vendors are very flexible and want to show you the aspects of their software that are most important to you, the customer. For this reason, I recommend that YOU develop the agenda for the day. The vendor may ask to move some things around to fit their product, but this ensures that you will see everything that you need to to make an informed decision.
After both in-depth demos, you can request final pricing and make a decision! Continue to use your requirements that you established early in this process to guide your decision. Although we are all bound to adhering to budgets, it is important not to make a decision solely on price. You’ve invested a lot of time in leading your organization through this change, and you want to make sure that everyone is happy with the new system for at least 5 to 7 years, if not more.
The last step is to kick off your implementation! What an exciting time! Don’t worry, all of you hard work during your software selection process, such as requirements gathering, process mapping and rallying the troops at your organization will pay off dividends as you prepare for this period of change and transition. There is nothing more exciting than kicking off an ERP implementation project where the product is the right fit and the customer has identified their pain points and needs!
Earlier in this article, I mentioned two groups of people that we encounter during a nonprofit accounting software selection process: Consultants and Organizational Pioneers. By following the guidelines above, we hope that you will become a more informed and equipped organizational pioneer. There is nothing more validating for all parties involved in an ERP project than watching a solution match someone’s needs, improving the overall efficiency and success of a nonprofit organization.
Written by: Bill Dean