Tracking how companies and their employees spend money is undoubtedly a critical component, not only for cash flow management, but also to ensure regulatory compliance and accurate financial reports.
But accurate reports are difficult to achieve, especially considering the challenges of corporate fraud, employee fraud and cyberattacks that all have the power to influence the numbers that ultimately go down in the books. Analysis from EY Global Financial Accounting and Advisory Services Leader Peter Wollmert said CFOs are increasingly struggling to produce accurate financial reports thanks to a deluge of data.
“CFOs worldwide are struggling to make the most of the increased volume and speed of data available to them,” concluded Wollmert in a statement in late 2016. “By focusing on innovative technologies and a more nimble operating model, CFOs and reporting leaders can design and deliver the responsive reporting capability required for a world that will continue to accelerate.”
A recent report by the Anti-Fraud Collaboration, which includes members of the Center for Audit Quality, the National Association of Corporate Directors and other members of the auditing and corporate finance field, emphasized the importance of collaboration in safeguarding company data, combating fraud and ensuring accurate reports.
Accounting is complex, but perhaps even more so for organizations within the nonprofit sector.
Ian Scotland, general manager and vice president of nonprofit accounting software company AccuFund, recently told PYMNTS that there are “distinct challenges” when it comes to financial management in this space.
“The biggest,” he said, “is the level of tracking [and] reporting they must do on how funds are spent. For example, when someone buys a cup of coffee from Dunkin’ Donuts, they don’t say, ‘Okay, of this $2.18, I want $1.05 spent on labor, $0.50 spent on coffee beans, $0.25 spent on milk and you can use the rest for overhead. Oh, and by the way, we don’t pay for cups.’”
“But that’s the reality of a grant-based nonprofit that needs to track how funds are spent in a very specific way, and then report on it,” Scotland explained.
Adding to the uphill battle is the fact that nonprofits are often strapped for resources.
“It’s quite challenging to keep overhead down,” the executive explained, “[it’s] one of the major focuses of a nonprofit accounting software package.”
Cost limitations could be one reason why Scotland said nonprofits, as well as government organizations (which similarly must meet stringent, transparent financial reporting requirements), have struggled to embrace more sophisticated cash flow management and accounting technology, despite a surge of recent innovation in the field.
“Nonprofits and government agencies have been slow to adopt the cloud for their computing needs,” he said, although he has seen the “tide starting to turn.”
As newer solutions emerge, Scotland explained that ease of use will be instrumental for increased adoption of these tools, especially in the nonprofit sector.
“Organizations don’t want to spend a lot of time and money training employees, even though experience shows that training is a wonderful investment in your organization,” he said. There are other reasons, too.
“Secondly,” Scotland continued, “ease of use should mean that advanced functions like data import from other applications becomes easier, enabling nontechnical staff to take advantage of features they couldn’t perform before. Lastly, ease of use speeds up data entry and processing and greatly reduces time spent preparing reports.”
The technology that has overwhelmed CFOs with data must also evolve to make it easier for those professionals to generate reports with the information they now possess. AccuFund recently announced its own redesign and software updates with a focus on enhancing usability, though Scotland added that ease of use is only one component of a successful accounting solution for the nonprofit space.
Support for regulator compliance is another major aspect, especially in today’s regulatory climate, he said. Compliance can be particularly challenging for this space, “as nonprofits need to comply with a different set of rules than their for-profit brethren,” he said.
He pointed to new rules from the Financial Accounting Standards Board, FASB ASU 2016-14, which took effect only last month.
“It changes the way unrestricted and restricted funds are presented on financial statements,” Scotland explained. “Organizations are going to need to update their accounting software in order to be able to produce these new formats.”
In addition to a physical redesign, the executive noted that AccuFund also updates its software to stay up to date on regulatory changes, as well as to keep up with more sophisticated technological demands, like mobile-friendly features and integrations with other apps and software within nonprofits, like payroll.
The accounting space is one that has quickly embraced a range of technologies, but Scotland identified a few key tools on which the company will be focusing.
“I think artificial intelligence is going to make a huge difference,” he said, “as it will enhance data processing and speed up manual tasks. That said, it will take a while to percolate into the average nonprofit.”
Meanwhile, API technologies — which are gaining widespread traction in multiple areas of the financial services and management arenas — are also poised to disrupt the accounting technologies market, Scotland noted.
“I think the use of APIs ... [is] going to be a huge help to nonprofit efficiency,” he said, adding that AccuFund currently has an API to enable data sharing with Salesforce, related to donations and donor information. The company is exploring the creation of new APIs moving forward too, he said.
“I think as more software goes to the cloud, this sort of technology will have the greatest impact on data processing in our client base,” Scotland said.