It’s No Longer All About the Math

The biggest driver in accounting software right now is not a technological
breakthrough or corporate prioritization or detailed market research. It’s reporting
trends like the Financial Accounting Standards Board’s (FASB) new Accounting
Standards Updates (ASU).

Financial statements will need to change from focusing on unrestricted, temporary,
and permanent attributes on revenue to tracking with or without donor restrictions.
While nonprofit accountants wrap their heads around what this might mean for
their internal processes, software developers are thrust into a role of trying to
figure how to provide customers with the tools needed for compliance.

“It’s a disruption for our clients,” said George Marcolini, vice president of
marketing for FUND E-Z Development in White Plains, N.Y. “FASB, when they
do an update, they don’t think of software implications, which I don’t blame them.
They want consistency across organizations.” Some effected clients will need to
remove or adjust prior years’ records. Others might need FUND E-Z to go in and
make adjustments to prior years.

The new ASU will be a larger issue for some software providers than others based
on configurability, according to Joan Benson, senior product marketing manager
for Sage Intacct. Of greater focus for Sage Intacct is FASB’s Section B guidance
due out next year. Those standards, according to Benson, will relate more to
organizations’ reporting of performance metrics. It will be an important change for
Sage Intacct in making sure that users are capable of tracking statistical objectives
such as immunizations provided or meals served at the project or location level.

The complexity of implementing new FASB standards will depend on the
organization’s mission, Benson said. Understanding organizational finances and
tying them into ROI can be more direct when one is talking about cost per program
participant, but more complex when trying to measure child literacy rates in
overseas countries. Sage Intacct has prioritized both, enabling donor and
fundraising tracking within its product while also creating compatibility with
products such as Salesforce to enable nonprofit leaders to account for multiple sets
of information.

Increased focuses on reporting, beyond standards, are a more general trend in the
nonprofit accounting industry, Benson said. “Financial leaders want a more
strategic role to move organizations to their objective mission as opposed to trying
to look back and close the books,” she said.

Sage Intacct recently partnered with GuideStar, a charity data resource. That
partnership, Benson believes, will lead to more organizational finance leaders
looking out the corner of their eyes at other nonprofits with a goal of raising the
bar from a reporting perspective. The information might also be of interest to
donors and grantors who want to see outcome and efficiency data. She pointed to
watchdog groups like Charity Navigator looking at outcome metrics on top of
financial data as a sign of this trend already in progress. The coveted major gifts
donor will, in turn, be more likely to expect more robust information before writing
out a check.

“People who are getting on board and what that means to their organization are
going to be more successful long term, especially from a donation perspective,”
Benson said of broader-scope reporting.

Even when clients aren’t wrapped up in new standards and procedures, Dan
Murphy, senior manager of fund accounting strategy at Abila of Austin, Texas,
predicts that a current increased emphasis on reporting will be the trend leading the
future of nonprofit accounting software.

“I see decentralization of accounting information being a huge need for
organizations,” Murphy said. “I see the demand for access to that information
increase across the organization. Non-traditional reporting and non-financial
information.” Examples might include data visualization and service information
interwoven with organizational financials.

Murphy said that the new ASU will not have a significant impact on Abila
products. That doesn’t mean that an increasing focus on reporting isn’t showing
itself in other ways. Converting complex financial information across subgroups of
organizational stakeholders, many of whom might be financial laymen, is one
priority that has emerged. A layperson might not be able to glean much from a
spreadsheet or chart and so dashboards highlighting key metrics can be a useful
way to make important information pop out, Murphy said.

Abila has also worked on features such as interdepartmental self-service with
view-only restrictions — think a more sophisticated version of Google Doc sharing

— in which staff in non-finance departments can access up-to- date reports without
having to go to the accounting department. The information is easily accessible and
digestible, but built-in restrictions avoid the risk of reports accidentally being
altered in the transfer.

“We have seen a greater desire for accountants to analyze,” Murphy said. “We’ve
seen organizations look to tell their story through data as a means of distinguishing
themselves from other competing nonprofits.”
An organizational desire to convert accountants from gatekeepers of information to
strategic partners with other heads within the nonprofit in telling the organizational
story is something Thomas Walker, senior product manager, and Michael Blanton,
product marketing lead, have heard from clients of Blackbaud of Charleston, S.C.

A homeless shelter, for instance, might want to tie in local census data on area
homelessness with organizational budget figures to show efficiency. “Financial
leaders are in the best position to tell mission-impact stories,” Blanton said.
“We’ve talked about leading stories moving forward, talking about outcomes,
utilization of spend, scholarships issued. Some of the new reporting insights that
we are delivering are around that.”