Technology & Innovation

Building a Business Case for Upgrading Your Nonprofit Accounting Software

A step by step on how to build a business case for upgrading your nonprofit accounting software.

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Nonprofits use their funding to drive mission impact. Today’s donors expect transparency and accountability, with financial reporting that demonstrates programs deliver in both desired outcomes and financial stewardship. Nonprofit CFOs need improved visibility that helps them make smart, data-driven decisions about programs, expenses, and investments. Many CFOs have been pursuing digital finance transformation by implementing modern, cloud-based nonprofit accounting software.

Most traditional accounting systems are not well-equipped for nonprofit needs, because they were designed around for-profit corporation needs. Nonprofit accounting software delivers industry-specific capabilities, such as grant management, nonprofit revenue recognition, and reports that meet FASB standards for nonprofit organizations.

Complimentary white paper: The Nonprofit Accounting Software Buyer’s Guide

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Before you take a request to the Executive Director and the board, you will want to evaluate your accounting software needs, establish key objectives, and develop a business case. This article walks through the steps for building a solid business case for upgrading to modern cloud-based nonprofit accounting software and highlights the ways it can help nonprofits achieve greater mission success.  

What is a business case?

A business case is a document or presentation that communicates the advantages, costs, and expected return on an investment—in this case, cloud nonprofit accounting software. The business case explains why your organization will benefit from upgrading your nonprofit accounting software and outlines your plan for the project.

The business case makes it easier for stakeholders and decision-makers to envision the success of the project and to align on the business objectives. It usually contains four parts:

  1. Needs and priorities
  2. Strategic value and benefits
  3. Financial value and cost projections
  4. Project plan

Let’s dive deeper into the research and analysis that forms each part of the business case.

Step 1: Identify organizational needs and priorities

The first section of your business case should outline the need for new nonprofit accounting software. First, identify organizational needs and see how your present accounting software comes up short. Verify stakeholder priorities and expectations across the organization. Ask yourself, and others, these questions:

  • Why is an investment in new software critical to our mission?
  • How might this help the finance and accounting staff deliver better service?
  • What should cloud nonprofit accounting software deliver for other stakeholders such as program managers, executives, and the board?
  • How could it improve our organization’s relationships with donors?

A better understanding of what different roles across the organization need from the finance team will improve internal alignment so your organization can deliver better outcomes. Define must-have and nice-to-have functionality for new nonprofit accounting software and explain these priorities in your business case.

“It wasn’t uncommon for some programs to be thousands over their budget at the end of the year and others to be thousands under. If we don’t spend all our funds, we risk having the county reduce next year’s budget. Now, everyone has real-time data about their programs—what’s been paid, what’s pending, and what funds remain. Our therapists tell us they love it—they can maximize their budgets and put every dollar to work.”

~ Nichol Ritchie, CFO, Tulare Youth Service Bureau

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Step 2: Focus on strategic value and return on mission

Furthering mission impact should be the main purpose of any nonprofit technology. Your business case should focus most on the strategic value cloud nonprofit accounting software could deliver to your organization. How will it help you achieve a better return on mission?

Here are seven ways modern, cloud accounting software helps nonprofits achieve greater mission success:

  1. Real-time visibility delivers insights that enable stakeholders to make better decisions more quickly, optimizing programs, plugging revenue gaps, and reducing expenses quickly when needed.
  2. Automated reporting enables significantly faster month-end close.
  3. Cloud-based accounting software enables teams to work together—in the office or remotely—around the world.
  4. Grant tracking and billing capabilities help you go after new funding opportunities and take donor engagement to the next level of accountability.
  5. Integration to other solutions saves time otherwise spent on data entry.
  6. Role-based dashboards provide stakeholders with access to evergreen financial KPIs and outcome metrics.
  7. Automation of multi-entity and multi-currency consolidation enables easier inter-entity transactions, local tax reporting, and location financial analysis while also delivering rolled up global visibility.

“Although our revenue budget has grown 60% since we implemented Sage Intacct, our finance staff only grew 25%. We’ve seen an overall efficiency improvement of 30% through automated workflows and fewer incoming questions since everyone has timely, accurate financial information via their personalized Sage Intacct dashboards.”

~ Karen Adame, CFO, Jumpstart

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Step 3: Present the costs and analyze financial return

Now that you’ve presented the strategic value of a cloud nonprofit accounting software solution, you will need to explain the projected cost and when your organization should expect to see a return on its technology investment. Productivity gains reduce back-office costs and help nonprofits run a lean staff. For example, Sage Intacct customers achieve an average of:

  • 250% ROI
  • 6 months payback
  • 79% close time reduction
  • 65% productivity improvement

With a cloud solution, it is easy to estimate the cost of the solution, because it is sold on a per-user subscription basis. The cloud vendor is responsible for maintaining and updating software, hardware, and security protocols. If you currently use on-premises accounting software, factor the cost of IT time and server maintenance into your savings.

The next areas for savings and return on investment will come from efficiency improvements that enhance productivity. The new nonprofit accounting software will help you work more quickly and accurately, automating key areas that used to require manual data entry, data manipulation, or reporting. Automation of all reconciliation processes, such as accounts payable, expense reports, and more will save time and ensure accuracy. Automated approval workflows will reinforce best practices in accounting. The productivity gains embedded in cloud accounting software mean staff can now focus on more valuable work.

“Sage Intacct has delivered clear ROI by saving our team members upwards of 70% of their time, which they can now allocate towards quality control, process improvements, and other strategic initiatives. As a result, we estimate that our investment in Sage Intacct was paid off in less than 6 months.”

~ Braam du Plooy, Controller, Atlanta Convention & Visitors Bureau

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Step 4: Outline the project plan

Give decision makers a roadmap for the implementation and adoption of the new software. Lay out project milestones and timelines. Explain what you plan to do to reduce risk and manage change. Outline what resources will be needed.

Fortunately, with a good vendor, you should find implementing cloud nonprofit accounting software goes fairly quickly and with few, if any, hassles. Cloud applications leverage APIs and Web services for easy integration with other cloud systems, so your organization can choose best-of-breed applications for different functional areas such as CRM, payroll, and donor management while still benefitting from end-to-end data visibility.

“We can track all of our expense types throughout the lifetime of a program—including everything from training teachers or supplying materials for the children to research and evaluation. When a large federal or corporate donor funds a multi-year literacy program across multiple schools, we can accurately report back the specific cost associated with each programmatic component, as well as the program’s impact to date, which increases our credibility and accountability as an organization. We would not have been able to do any of this without Sage Intacct.”

~ Shari Freedman, CFO, Room to Read

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Complimentary white paper: The Nonprofit Accounting Software Buyer’s Guide

Download now
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Final Thoughts

As you have seen, nonprofits that upgrade their accounting software to pursue digital transformation unlock important tools and insights that benefit mission impact. It is a best practice to create a business case to request new software. It helps clarify objectives, align stakeholder expectations with achievable results, and define strategic value. You can discover additional best practices for evaluating nonprofit accounting software, including seven attributes to look for in a cloud vendor and seven must-haves for Service Level Agreements (SLAs) when you read The Nonprofit Accounting Software Buyer’s Guide.