January 2014 Meeting

Sneakerware:  Best Financial Systems Integration Strategy for Nonprofits?

David Orlinoff, founder and principal of Concord Financial Organization (CFO), which provides interim financial management and related consulting services, primarily to nonprofits, gave a brief presentation and led a discussion on the on the integration or non-integration of financial systems and what it means for your agency. David has over 35 years of experience as a financial executive and has served about 60 nonprofits as a consultant or interim chief financial officer. He is also the board president of Third Sector New England and a member of the Audit Committee of United Way.

How well does your general ledger software integrate with other systems such as billing/receivables, payroll, and fundraising or not at all? Do you rely on spreadsheets and journal entries to bridge the gap between the different systems? That’s the concept behind “sneaker ware,” a geeky term referring to data that isn’t transmitted; it’s information that is moved, as the name implies, by foot or any other physical means, between computers.

Over the past 15 years, the idea that all computer systems within a nonprofit should “talk” to each other and be fully integrated has gained ground. Such systems include: fundraising, CRM (customer relationship management), accounts payable, payroll/HR, billing and A/R, and various other systems. This school of thought advocates that all of these various systems and software packages should be connected to the General Ledger, which can then be used to produce reports and analysis of data. Everything is inputted into the “outer” systems and then is automatically transferred to the GL. David is of the opinion that the gains from total integration do not justify the work required to setup the fully integrated
system and the expertise and effort necessary to maintain it.

David recommended that we focus on setting up the best individual systems and then integrate them only if it is not too complex and it is necessary.

David stated that 10 years ago, integration of systems was very expensive. Now there are some programs available that are developed by the same software company that are designed to be linked – such as Raiser’s Edge (fundraising) and Financial Edge (accounting). You still have to be careful that if you do a journal entry in the GL which concerns fundraising, then you have to make a similar entry in the fundraising system. Both systems must be operating with the same data at the same time. Often, there is conflict between fundraising and accounting about the timing of recognizing grant income. The CFO should educate the Board of Directors about the differences between fundraising reports and how the same grants/income appear on the financial statements. Grants may show up in multiple accounts in the accounting system, such as restricted, temp. restricted, unrestricted, etc. Different people doing different jobs will want to get different information out of the integrated systems. Mostly, it is the fundraising and finance systems that are linked. Integrating billing and A/R is more complicated. Finally, according to David, the only people who really appreciate the fact that everything is connected are: Zen Buddhists, chiropractors, and CFOs.