BUSINESS INSIGHTS | WINTER 2009/2010 EFFECTAccounting in the Clouds
by Abe MathewEarlier this year I met with leaders from a large membership association to discuss a variety of challenges they’re facing. One of their biggest issues was having three locations spread across the country. The association’s ownership group was based in California, the operations were handled out of Washington DC, and the accounting took place in Minneapolis.
As a nonprofit association bound by Internal Revenue Code (IRC) Section 501(c)(3) accounting rules, the entity has specific financial reporting requirements. Because of its geographic set up, it was necessary to obtain signature approvals across all three sites. For years, the association accomplished this task by mailing documents from location to location, which was slow and cumbersome, and allowed for gaps in internal controls. Not surprisingly, they had encountered fraudulent checks. In addition, the group outsourced the information technology (IT) department, which further complicated matters.
Three locations, one solution
We asked ourselves, is there a way to simplify our clients’ reporting requirements and improve their internal controls short of recommending a cost-prohibitive consolidation of their geographic structure? Because they’re running a nonprofit organization with a limited budget, we kept cost concerns in the forefront.
Based on a needs analysis, our team came up with a solution to use a cloud computing system called Intacct. Cloud computing refers to Internet-based applications that are hosted at data warehouses. Examples of everyday cloud computing applications include Gmail, Hotmail, and Flickr. These sites provide a way to access email, share pictures, or collaborate on a project, anywhere and anytime. Over the last decade cloud computing’s popularity has crossed over into business-related Web applications, and more and more businesses have embraced this method of data sharing.
Turn and face the change
The association found marked improvements a few months after implementing this software, which handles accounts payable, accounts receivable, and overall budgeting.
First, the new technology gives the association the ability to submit bills and expenses from any of its three offices. At the end of each week, the controller logs in and selectively pays bills, and at that point, the owner receives an email notification letting him know bills are awaiting approval. The executive director then logs in to the accounting system, views scans of the bills, and approves them. Once approved, the bank either makes an electronic payment or prints the check on behalf of the client (similar to online bill pay offered by most banks).
All our client needed
was a computer and access
to the Internet.
Because the system documents all of the steps, including the time, date, and action taken by each person, the organization has significantly improved internal controls and financial reporting oversight. For example, department heads can log in from any location and pull up real-time financial dashboards and reports. The controller can import membership revenue information from the membership management system on a weekly basis to keep the dashboards up to date.
Furthermore, the client does not have to worry about maintaining, hosting, or updating the software, which is all provided by the system’s vendor. This also includes a 24-hour disaster recovery plan.
Is cloud computing for everyone?
The beautiful thing about cloud computing is that you don’t have to be a Fortune 500 company to be able to take advantage of the service. There are generally no up-front licensing fees, just a monthly hosting fee and a one-time implementation fee. All our client needed was a computer and access to the Internet, which the association already had. However, it may not make sense to use cloud computing in situations where you have a significant investment in internal technology resources, or if regulations require that data you manage remain on an internal network.
Cloud computing could go in many directions in the future. We’ve already seen the concept expand into customer relationship, membership, and practice management systems. As business and technology continue to intertwine, it’s clear that some of these tools and systems contribute to improved operational effectiveness. So embrace the technology options that are right for your organization. And most importantly, remember that these tools can allow you to spend less time thinking about operations and more time on accomplishing your mission.