Nonprofit Accounting Basics

Getting to Cloud Nine: The Path to Successfully Implementing Cloud Accounting Systems

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As forward-looking as Jeff Bezos, Larry Page, the late Steve Jobs, and the rest of Silicon Valley might seem, one of the tech world’s newest darlings is quite an old idea. In fact, Pentagon scientists discussed the combination of hardware and software as a service as early as the 1960s, a time when “the cloud” would have sounded like pure fantasy. Why the decades-long lag between dream and reality? It certainly was not because of lack of talent or creativity. Today, cloud accounting is a means nonprofits can use to accomplish their missions. However, you need to understand what opportunities and potential pitfalls come with a move to the cloud to ensure that, if and when such a move occurs, it is done right.

The Sky’s the Limit

What’s the hype all about? Well, to name a few things, basing your accounting system in the cloud can make information more readily available to its users, streamline processes, and deleverage firm resources leaving you to focus on your mission.

Shared Infrastructure

Before the advent of the modern water utility system, it was normal for people to have wells built on their property where they could access water. There’s a reason you don’t have one in your office today. The most important benefits of sharing computing infrastructure through the cloud is flexibility. Did you have a campaign of Kony 2012-size success this year? Do you want to? When you have a rapid increase in activity, the cloud will give you faster access to additional infrastructure than buying and installing your own server would. By the same token, if the golden days are recently past you, you won’t have more server and IT salary than you need taking up space, energy, and capital which you could be using for program spending. This deleveraging will make your costs more flexible and therefore less risky.

Data Accessibility

Simultaneous access to data by multiple users at their convenience, using a variety of devices from anywhere an internet connection is available, means waiting for emails to be returned regarding the status of a report or remotely connecting to a different computer becomes rare. That inherently makes processes more efficient. Telecommuting becomes easier, in turn reducing overhead. While centralized access to data is a characteristic of cloud accounting, the collaborative dividends derived from that access are true value generators.

Data Integration

Cloud accounting, by its very nature, offers a unique opportunity to create a more seamless connection between CRM, project management, and other applications with a financial program. This kind of integration across various platforms has been a concern for many because a lot of the cloud accounting applications, in their infancy, did not establish relationships with other applications and were limited in their own power. Today, these companies are expanding their own portfolios and partnering up with other providers of business applications while companies like eBridge Connections tout integrating over 40 financial systems (Microsoft and Intuit products included) with other CRM and eCommerce packages. The consequences of this development are not only greater efficiency but improved control over financial information.

Did I mention software upgrades take care of themselves?

Rain Clouds? Bring an Umbrella…

As nice as the opportunities floating in the cloud are, turbulent challenges should be given attention before deciding on a move to the cloud and kept in mind during the transition too. Security, conversion, excessive dependence on internet connectivity, and data lock-in all top the list of such challenges. Consider the following tips to protect yourself from these threats.

Security

Information security is the single greatest concern for managers who are looking to move their systems to any sort of shared computing infrastructure. Some argue this concern is more a function of not being able to see the server sitting in your office the same way people must have wondered what black magic allowed people to converse by telephone in the 1870’s. Regardless of what the degree of risk is, be certain to vet whoever is handling sensitive financial information.

Don’t compromise data.

  • Confirm a vendor’s daily use of either McAfee Secure, HackerGuardian, or another third-party certification service
  • Review AICPA Service Organization Control Reports 2 and 3 (formerly SAS 70 Reports) to confirm a vendor system’s infrastructure, software, people, procedures, and data control quality
  • Consult the AICPA’s Trusted Business Advisor page for best-in-class vendors here: AICPA Endorsed Cloud Vendors

Conversion

Change, even if it is for the better, does not come easily. Relearning how to issue checks or setting up a new accounting system requires an investment of time and resources, but without committing those two things, the transition to the cloud will not yield desired results.

Do not muddle the transition.

  • Communicate the benefits of a transition to your co-workers and management throughout the process. If downtime is going to be reduced or telecommuting more possible, people will appreciate that and want to contribute to its use.
  • Map your processes and then evaluate the necessity of their components after you begin operating in the cloud. Do not be afraid of process-changes if they will produce the same end results.
  • Schedule your transition and commit to it. If you do not commit to a scheduled transition, relic processes can linger and bog down your work.
  • Manage expectations before and during the transition. Communication is key in these situations.

Access Reliability

As convenient as the increase in quantity of possible connections given by the cloud, the quality of that connection in terms of speed and reliability can be problematic. That is a real concern that can diminish the benefits of the broader access to centralized information.

Don’t slow down the process.

  • Shop around for access to plenty of affordable bandwidth
  • Acquire an alternative provider who can provide backup internet access
  • Ensure your cloud vendor promises minimal downtime. Some promise even 100% uptime which is nearly impossible to do independently in a cost-efficient way

Data Lock-In

In case it has not become apparent yet, your relationship with vendors in the cloud can become quite intimate. Vendors may close shop, become unreliable, raise prices, or in other ways fail to deliver what you want, so be confident your vendors have staying power and keep a parachute in tow just in case you part ways.

Don’t get pigeon-holed.

  • Use standard applications that easily integrate with others. eBridge Connections increased its integrations between applications by over 10% in the first half of 2011 alone. See if the applications you use are on there.
  • Research your vendor’s financial information, the number of clients it has, and the business alliances they develop. A company like Intacct, with a rapidly growing client-base and plans to go public, should give you a sense of confidence in their staying power.

The greatest innovations can only bear fruit if they are implemented well with the right support. Otherwise, they are just an idea in a research paper. Today, unlike the 1960s, if you choose to account in the cloud, the supporting players and institutions are at your disposal; you just have to find them and execute.