Technology has put a lot of powerful tools into the hands of even the smallest nonprofits, for managing donor relationships (in their donor management/CRM system) and managing their organizational finances (in their accounting system).
But according to nonprofit finance experts like Carolyn Sechler CPA, many nonprofits don’t use these tools effectively, and bog themselves down by not distinguishing accounting tasks from CRM tasks. Specifically, many nonprofit executives feel that every donor/customer and every donor transaction needs to be documented in the accounting system, even though all that data is already in the CRM. Carolyn says that it’s duplicative, and is even counter-productive
She tells us that there are (at least) three reasons why nonprofits should streamline their accounting system, and keep it free of transaction detail and “customer” data:
- It slows the performance of your accounting system
- It creates an unnecessary redundancy of data and of work
- It’s one more thing that has to be reconciled, with possible conflicts and data entry errors.
“There’s no need to keep specific donor information or transaction details in your accounting system. You get all that detail in your CRM anyway. Why would you want it in two places?,” she asks.
Carolyn’s best practices for financial controls suggest that the CRM should serve as a “subsidiary ledger,” where all transaction details, including donor names, appeal codes, campaign codes, etc. are kept. The accounting system, which you need to generate financial statements such as the income statement and balance sheet, only requires summary, general ledger information. Any supporting documentation needed can be gotten straight from the CRM.
Here’s a simple work flow for cash control, efficiency and financial integrity, according to Carolyn:
- One person processes receipts, makes appropriate copies, etc. and enters all gifts into the CRM (not into the accounting system).
- That person batches up the receipts in the CRM to create a deposit ticket report
- A second person, acting as a check/balance, counts the cash and double checks the report.
- When the report is reconciled with the cash, it’s off to the bank. And the reconciled summary of the batch (by fund or GL code) is entered or imported into the accounting system.
- Done! Everything matches, and data entry errors and conflicts are eliminated. The CRM acts as a “subsidiary ledger” and provides all the supporting documentation to explain any entry in the general ledger. If you reconciled your cash with your deposit report, the accounting system will always be in perfect sync.
“Every nonprofit should craft a simple, efficient procedure that that includes checks and balances, but eliminates unnecessary steps,” she says. “That’s why I love Bloomerang’s QuickBooks export feature. It batches up all the essential data that your accounting system requires, without creating any extra work or any clutter in the systems.”
But, you say, my 990 filing requires a report of top contributors!? Well, it’s right there in the CRM.
What if my Board of Directors needs to see more detail, like results of various appeals or campaigns? That’s what the CRM is for.
What about my auditor? Maybe they want to tie out random donor info and tie totals to general ledger. Well, there are reports for that – they should meet their needs for the global tie out.
So keep all your systems, including your CRM and your accounting system, free of unnecessary clutter. And keep your office procedures and work flow as simple as efficient as possible.