ERP for the growing nonprofit

Nonprofit ERP (Enterprise Resource Planning) systems are increasingly finding their footing at organizations. Beyond the acronym, ERP systems are sophisticated accounting and financial management systems. While an accounting system will help you manage accounting, an ERP will add functionality and business process automation in diverse areas such as:

  • purchasing and purchasing orders
  • dimensional reporting
  • evaluate effectiveness of fundraising channels/efforts
  • budget planning and management

Many organizations, such as food banks or those with complex retail operations, have complex inventory management or e-commerce requirements that an ERP can manage. These functional areas are usually managed by siloed systems, spreadsheets, or with basic forms. Modern ERP solutions can track these areas…and more.

Knowing when it’s time for your nonprofit to move to ERP

Many nonprofits still rely on legacy, on-premises accounting systems. Often, vendors that haven’t modernized their products. Or, an organization has the basic accounting system they started on. Suddenly, with growth, those solutions no longer meet their needs.

As the CFO (Chief Financial Officer) builds out their finance team and they now handle managing contracts, have complex approvals, or detailed grant tracking their accounting system starts to get pushed beyond what it’s capable of doing. These are some of the pain points nonprofits have prompting questions about ERP.

Then, as the organization grows, and your complexity increases, you have more fiscal responsibility. You may want to modernize purchase orders, which is where purchasing comes in. Once an organization has purchase orders, budget management needs grow. Excel spreadsheets aren’t cutting it anymore because there are budget holders, and all those budgets must roll up to something. This creates the need to track how folks are spending against their budgets.

That’s where an organization will start to say, “We need an ERP to help us manage this all better”. But oftentimes, the ERP is also the last thing to invest in because it’s seen as simply an operational investment.

Change Management and ERP

Unfortunately, many nonprofits tend to go it alone with respect to ERP. This misses a crucial step in selecting ERP – engaging stakeholders from across the organization. Many finance teams are pretty siloed or compartmentalized. But they think differently than most of the organization and they tend to be very internally focused. They think, “Okay, this is something that we touch, this is our system.” They don’t believe there really is a broader stakeholder group.

Without thinking about stakeholders and the change ahead the risk is the same as it is with every other technology project. If they aren’t engaged, it becomes about folks thinking it didn’t go well because they weren’t informed, and they weren’t prepared. So, there’s backlash when it’s launched. Staff think that the rollout of the product was a disaster, even though from the accounting team’s standpoint, it was fine. But anytime they’re touching another group or needing information from that group, there’s been a change and they’re having to figure it out or communicate it on the fly. It becomes a bigger issue and a much more time-consuming issue than if engaging stakeholders had just been part of the project from the outset.

But what happens with successful ERP implementations is that that it broadens who is consuming information outside of the finance team. Change management in ERP selections helps everyone connect the dots to how the broader organization wants to work. ERP selections, and implementations, need someone to bring the perspective ERP is not just a finance system. There are decisions that affect, and impact, others. You need to bring in other stakeholders.

Some of the more common stakeholder groups that should be included in ERP selections are:

  • Fundraising/Development operations: This team often works closely with finance, but they often don’t talk to each other when they have projects going on.
  • Marketing. Finance teams often forget how much financial planning goes into the design and structure of campaigns, launching those campaigns and measuring ROI.
  • Leadership. Leadership makes decisions based on financial data. Ensuring they have a seat at the table, to ensure they have the information they need to run the organization.

Our Change Management Impact Catalog helps identify stakeholders and make sure they are supported through the change in ERP ahead.

An ERP selection and implementation impacts different people in different ways. Whether the impacts are large or small, creating a catalog of the changes ahead gets your ERP implementation on the right track.

Opportunities that an ERP Selection Unlocks

Chart of Accounts 

 In our experience, ERP implementations involve changing how your chart of accounts serves your organization to better leverage modern ERP solutions. 

 With legacy accounting systems, there is a basic account structure which is represented by a string of numbers. Legacy charts of accounts are often built on the fly and can typically be done in a very ad hoc, disorganized way. 

 Implementing ERP creates the opportunity to step back, to think about your chart differently. Because, with modern ERP solutions you can slice and dice the information differently.  Modern ERP adds more dimensions and tagging, requiring less complexity embedded in your chart of accounts.

Vendor Management 

There’s always a lot of room for improvement in how folks manage vendors, especially as you’re moving to a more modern ERP system.  

From how vendors are added, onboarded, budgeted, and paid, there are business processes that can be reevaluated and optimized. This gives staff, outside of finance, greater ownership and input into the vendor management lifecycle.

Deferred revenue/pledges 

ERP can mean new, and improved ways of managing deferred revenue, pledges, and grants. Often, this deferred revenue is managed outside of the legacy accounting systems, and it is really, really inefficient. So, deferred revenue tracking and management  is something you want to evaluate when growing into a modern ERP. 

Nonprofit ERP Vendor landscape 

Compared to other solutions such as CRM (Customer Relationship Management) the vendor landscape of nonprofit ERP solutions is small. However, it doesn’t make the choice less complex or involved. Some of the solutions we encounter the most, in our experience selecting nonprofit ERP, include (in alphabetical order): 

  • Microsoft Business Central 
  • NetSuite 
  • Sage Intacct 
  • Workday 

However, there are certainly other solutions and, ultimately, your requirements should guide you. These solutions are typically implemented by an implementation partner. So, in many respects you are making two selections – the ERP solution, and the implementation partner. Too often, a CFO or COO will say “Let me just hire an implementation partner that knows the ERP that I saw a demo of, and I fell in love with, because it’s better than we have” 

 Getting ready for ERP 

 When your organization is ready to explore if its ready for ERP, we recommend that your organization: 

  1. Find and engage stakeholders that are going to be affected and plan with them for the change.
  2. Explore how ERP can change the way your organization works, from the finance team and beyond. 
  3. Don’t simply select a new modern ERP because it’s “better” than what you’ve got. 

 A modern ERP can transform how your organization works. With the right planning, can become a centerpiece of an effective nonprofit finance and operations technology ecosystem. 

Technology Roadmap