Knowing When to Leave QuickBooks

1. Knowing When to Leave QuickBooks Presented by Lee Bengston, CPA Audio dial-in: 1-866-740-1260 Access code: 5865011

2. Objective Help nonprofit decision-makersrecognize that their organization is outgrowing QuickBooks, why, and know what to do about it.

3. Agenda: • Software and organizational growth • Reviewing where QBs is a good fit and getting the most out of it • Some leading indicators that QB is no longer up for the job • Accounting requirements that are challenging to QB • Alternative solutions when leaving QB • Developing a transition plan • Additional links and resources

5. When is QuickBooks a Good Solution for Nonprofits • Basic financial management best practices in place • Management values financial information and understands risks. • There is a qualified accounting person on-staff or available. • Accounting member is part of the management team. • There is a qualified Board member or other resource to provide oversight of the accounting function. • An early- to mid-growth organization • Annual operating budget not too much over $2M • A single main organizational entity • No more than a 2 or 3 main funding sources • Most funding is program generated or from unrestricted contributions

6. Best Practices for QB’s Use in Nonprofit Organizations • The basic account structure and use • GL account – the what? (assets, liabilities, net assets, revenue, expenditures) • Class – the purpose or why? (programs, fund raising, administration, restrictions) • Programs • Fundraising • Administration • Form 990 categories • FASB 117 restrictions • Board designations • Job – available to track projects, grants, contracts, special events, etc.

7. Best Practices for QB’s Use in Nonprofit Orgs (cont) • Use numbered accounts and class codes. • Sub-accounts and sub-classes not more than two levels • Prompt to assign classes. • Code transactions at lowest account and class levels. • Periodically review coding structures, use tools to revise and reorganize. • Have a 2nd knowledgeable person review financial statements. • Setup customer and job types for report filtering. • Memorize key recurring reports and assign to report sets. • Export report sets to consistently named Excel workbooks. • Reconcile donor software reports to pledges receivable and cash • Accountant’s or Enterprise edition and Intuit Statement Writer

8. Some leading indicators that QB is no longer up for the job • 3 or more concurrent users • Fairly frequent slowdowns and freeze-ups • Multiple grants with different fiscal reporting periods and rules • Direct or indirect federal funding over $500k (OMB Circular A133 audit) • Manual interfaces with other systems • Distribution of labor and other costs to grants and programs burdensome • Need for indirect cost allocation • Budget inflexibility • Financial analysis all off-line

9. Some leading indicators that QB is no longer up for the job (cont) • Over-use of Excel for subsidiary records • Excel reporting more time-consuming and error-prone • Audit preparation and coordination are a big extra workload • Restricted funds growth • True fund accounting required or advisable • Need to track revenue/expenditures and budgets to multiple objects (departments, locations, projects, etc.) • Chart of accounts bastardized beyond repair • Internal control and security issues • Audit trail issues • More and more workarounds • Pressure from outside auditors and funders

10. Accounting requirements that challenge QB • Tracking beyond GL/Class/Job • Direct cost allocation (splits) • Indirect cost allocation capability • Grant budgeting and tracking for cross-FY reporting • User access security limited • Multiple budgets and forecasts • Budget control • GAAP for nonprofit (FASB 117) and gov’t (GASB 34) not supported • Internal control • Audit trail • Reporting scope and flexibility

11. Alternative accounting solutions when leaving QB • Commercial ERP systems • Sage MAS or Pro, MS Dynamics GP • Netsuite or Intact • Others • Specialized nonprofit or governmental system • Abila Fund Accounting 100 (formerly Sage MIP) • Financial Edge (Blackbaud) • AccuFund, Traverse, Fund E-Z , CenterPoint, Couger Mountain, Black Mountain, Aplos • In-house or hosted (the ‘cloud’) • Client-server or web-based • Perpetual license or subscribed (SaaS)

12. Developing a transition plan • Get realistic; adjust attitude on price; usually dealing with organizational transition • Be prepared to justify the investment to board and get it in the budget: • Staff time spent on extra work outside the system that could be saved and re-deployed • Compliance with GAAP and following best practices • Opportunity cost of missed revenue opportunities • Audit and internal control issues • Risk of fraud or misallocation of assets • Frame in an organizational growth context • Value of better strategic decisions based on accurate, relevant and timely information

13. Developing a transition plan (cont) • Evaluate needs – what are the 3-4 main issues to solve • Consider organization and personnel • Appoint lead person for project • Frame acceptable alternatives • In-house • Hosted • Web-based • Client-server • Find potential providers (Web, peers, published reviews) • Hold preliminary conversations with vendor or VARs • Attend overview demos • Get preliminary pricing

14. Developing a transition plan (cont) • Ask for references of similar organizations • Narrow the field to one or two potential solution sources • Share time and information with providers • Prepare a needs analysis • Have software demonstrated to address main issues • Select provider • Finalize agreement • Develop implementation plan