7 Reasons to Integrate a Nonprofit's CRM and General Ledger | npENGAGE

The Top Seven Reasons to Integrate Your Fundraising CRM and General Ledger

By on Sep 16, 2020

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integrating nonprofit CRM and general ledger

Directors of Development and Directors of Finance often find themselves working in a love/hate relationship. Not with each other, no; but rather with the numbers for which they are each responsible.

Development and Finance both love when fundraising revenues are up – when fundraising reports and financial statements depict increases over last year, over targets, and over budgets. Similarly, they both loathe reporting that shows that fundraising revenues are down or not able to support the budgets on which mission and program depend. But even when fundraising is routinely exceeding targets and the gifts cannot be processed – nor the donors thanked – fast enough, Development and Finance both hate when their numbers don’t correspond.

Think of this all-too-common scene:

[FADE IN ON A BOARD MEETING]

DEVELOPMENT DIRECTOR: As of June 30, we’ve raised $9.2 million.

FINANCE DIRECTOR: Fiscal year-end numbers have not been fully reviewed yet, but recognized revenue from fundraising will be close to $7 million’

DEVELOPMENT DIRECTOR: What the . . . ?!?

EXECUTIVE DIRECTOR: Ugh.

[She throws her head in her hands and – FADE OUT.]

The executive director also hates when the numbers don’t correspond, since, ultimately, the buck stops with her.

To make matters worse, in a scenario like the one above, organizational stakeholders may often think the Finance side is more ‘correct’. Right or wrong, in scenes like the one above, Finance can be perceived as more ‘black and white’, while Development can be perceived as more ‘fluid’. Accounting practices have been monitored for more than 130 years by organizations such as the AICPA and the FASB, while fundraising oversight is much more recent and focuses more on ethical fundraising practices. Furthermore, financial reporting (not development reporting) supports information that is submitted to the federal government as a part of your nonprofit’s Form 990 – to ensure that an organization can maintain its tax-exemptions.

Changing the Scene

Regardless of which of the teams you’re on (and I’ve been on both), you want to be able to love your numbers whether they’re up or down, knowing that you can confidently get them to reconcile with those of the other team. And, neither team wants to spend countless, unnecessary hours either searching for reconciling items, or manipulating financial data that is generated by the fundraising system so that it can be pushed into the finance system without exceptions and properly tie out.

You can change the scenario (including the dramatic little scene above) by effectively integrating data from your fundraising CRM and your accounting system. This can be accomplished by using technology solutions – bridges – which ensure that nobody on either team is required to manipulate transactions, add or delete rows or columns, or convert files to a different format.

So –

[dramatic but optimistic fanfare]

– let’s look at the top seven reasons to integrate your fundraising CRM with your general ledger:

  1. Reducing Errors
  2. Reducing Effort
  3. Maintaining Proper Control Over Data
  4. Reducing Clutter
  5. Easier Ongoing Reconciliation
  6. Common Understanding of ‘The Numbers’
  7. Promoting Collaborate Across Functions and Teams

The top seven reasons to integrate your fundraising CRM with your general ledger:

 

1.     Reducing Errors

When systems are integrated, data only have to be entered one time, and in one place (whether manually keying, or through importation). It follows then, that if transactions are only entered once, it cuts the opportunity for errors in half. If transactions are entered accurately the first time into an integrated system, there should be no concern about accuracy when they are posted, because no further human hand will touch them.

However, there’s another opportunity for error-reduction. Some processes are semi-integrated inasmuch as a file can be generated from the fundraising CRM to be imported into the accounting system. Still, without full integration, that output typically has to be manually manipulated by one team or both to ensure that it contains the proper columns, headers, and summarization. Plus, often the fundraising output file has to be converted to another format before it can be brought into the accounting system. All of this presents the potential for errors.

Finally, integration can enforce some accounting controls that will further reduce the likelihood of errors. For example, an integrated posting process can mark transactions as ‘posted’ in the fundraising CRM – so they can’t be inadvertently posted again – and lock a posted gift transaction so that it cannot be edited without generating adjusting journal entries.

So, to summarize, when systems are integrated, errors will be mitigated because:

  • transactions only have to be entered one time and in one place (ie, in the fundraising CRM)
  • output files from the fundraising CRM don’t have to be manipulated or converted
  • accounting controls can be enforced to further reduce the likelihood of errors down the road

 

2.     Reducing Effort

Reducing effort means reducing time, energy, and stress expended on getting fundraising financial data into the general ledger. There are a number of ways that integrating your systems can reduce effort overall:

  • Entering data (manually or through importing) into only one system instead of into two systems reduces the overall level of effort on data entry, saving man-hours
  • Not having to manipulate output files, manually summarize transactions, or convert files to another format will also reduce the time spent on the posting process and will make posting transactions from the fundraising CRM more efficient overall.
  • When there are few errors or none at all, team members will need to spend very little time on detective work — and the resulting corrective action. And, even more time can be saved by not having to investigate and remediate hard-to-identify items that hinder reconciliation.

 

3.     Maintaining Proper Control Over Data

One less obvious reason to integrate systems is to ensure that each team continues to maintain control over their own data – the data necessary to run their department of the organization.

When systems are integrated, each team can be confident that they don’t need to be over-involved in the other team’s business, or that the other team will need to be overly involved in theirs.

Development remains in control of fundraising recording and reporting, while Finance remains in control of accounting recording and reporting. But, with controls in place to ensure that systems can be easily aligned to each other.

 

4.     Reducing Clutter

Reducing clutter goes to the concept of the integrated fundraising CRM serving as a true subsidiary ledger to the general ledger – the same way that Accounts Payable or Payroll is structured. In that case, most if not all fundraising transactional details remain in the fundraising system. From there, only summary transactions are posted from the CRM to the general ledger so that the latter does not become unnecessarily cluttered.

The caveat in this scenario is that it’s critical to ensure that the detail in the fundraising CRM is always in agreement with totals in the general ledger. At any time, a fundraising system report of transaction detail and totals by account or fund for a particular date (or date range) should always be able to ‘tie’ to the corresponding account totals or balances in the general ledger for the same period.

 

5.     Easier Ongoing Reconciliation

Everything discussed so far above informs easier ongoing reconciliation between systems. A standard rule-of-thumb that pertains to the majority of transactions is that there should be a three-way-match between the fundraising system gift or revenue entry, the posting to the general ledger, and the deposit to the bank.

Integrated systems can ensure error-free and low-effort posting from the CRM to the general ledger corresponding to each bank deposit – whether that occurs on a frequency of daily, several times each week, or even several times each day. If every CRM gift batch can tie out to what’s posted to the general ledger and to what’s deposited in the bank for that batch, end-of-period reconciliations should be a snap.

Even for non-depositable revenue, integrated systems make it easy and agreeable to post and reconcile daily or as often as is needed.

 

6.     Common Understanding of ‘the Numbers’

In the dramatic scene at the beginning of this article, there was obviously no common understanding of the numbers between Development and Finance. Integrated systems force that common understanding because they support and encourage ongoing reconciliation – and common understanding when numbers don’t correspond.

In that ‘scene’, the reason that the numbers were off was because some of the larger campaign pledges were conditional, and therefore, not immediately recognizable as revenue. In addition, low-dollar one-time telemarketing pledges were only recorded as revenue when they were paid, not pledged.

An integrated posting process and routine reconciliation would have not only identified these items on both sides, but would have prompted proper internal communication to ensure that both teams reported consistently. As explained in Omatic’s article on reconciliation, flexibility, efficiency, and accuracy are all key supporters of effective reconciliation, and internal communication is the pathway to ensure these three essential elements are top of mind.

Free download from the Blackbaud Institute: The Connected Office: Your Guide to Creating a Cohesive Constituent Experience

 

7.     Promoting Collaboration Across Functions and Team

Some of these top reasons for integrating systems are more tactical and others more strategic – or, perhaps, some ‘quantitative’ and some ‘qualitative’ – and, long term, the qualitative cannot be ignored.

On the surface, integration resolves a tactical issue: accurately and efficiently getting revenue transactional data from the source system into the organization’s financial system of record. The outcome of successful integration is more time, less stress, and more confidence and trust, both in the process and in the numbers.

It goes back to that love/hate relationship – when you can consistently trust process and love the numbers, stronger cross-functional collaboration will naturally evolve. Team members will be happy to cooperate in the rare instances that something has to be investigated on one side or the other. Each will be inclined to be sure data are aligned and coordinated when communicating with executive or external stakeholders.

 

‘Take Two’

[FADE IN ON A BOARD MEETING]

DEVELOPMENT DIRECTOR: As you can see, as of June 30, we’ve raised $6.9 million in cash and short-term pledges and another $2 million in conditional and long-term pledges. We’ve also recorded about $300,000 in smaller telemarketing pledges that, historically, we don’t count as gift revenue until they’re paid.

FINANCE DIRECTOR: That’s right. As you can see on the June 30 income statement, fundraising revenue for the year is just a hair over $6.9 million.

EXECUTIVE DIRECTOR: Thank you. Any questions from the Board?

[She smiles as a board member begins to make an innocuous statement – FADE OUT.]

Integrating your fundraising CRM and general ledger through the use of specialized software will ensure that funds recorded as raised properly correspond with the money recorded as revenue from fundraising on financial statements – or reasonably explain when they don’t.

But along the way there, you’ll save time, be more accurate, ensure that systems are not cluttered, and build trust and confidence among the teams and their leadership. And, a fully-aligned pair of integrated systems will drive improved transparency, insights, operations, and, ultimately, accountability to both leaders and donors for delivering your mission.

ABOUT THE AUTHOR

Stu Manewith joined Omatic Software almost five years ago as Director of Professional Services.  In that role, he provided leadership to Omatic’s consulting, implementation, training, and custom-development teams.  Prior to that, Stu worked for 13 years at Blackbaud, also in Professional Services, working with the Raiser’s Edge, Financial Edge, and Blackbaud CRM implementation and consulting teams as a consultant, solution architect, and practice manager.

Previously, Stu spent the first half of his career as a nonprofit executive, fundraiser, and finance director, working in both the healthcare and arts/cultural arenas of the nonprofit sector.  He holds business degrees from Washington University and the University of Wisconsin, and he earned his CFRE credential in 1999.

Currently, Stu serves as Omatic’s Nonprofit Advocacy Director.  In that role, he is Omatic’s nonprofit sector domain specialist and subject-matter expert, and is responsible for actively promoting and demonstrating Omatic’s position as the nonprofit industry authority on data health and integration.

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