When the Salvation Army implemented a new accounting system last year, it could hardly have imagined what lay ahead. Delays in payments to suppliers led to two senior finance officers resigning, a serious incident report being logged with the Charity Commission and claims in The Mail on Sunday that the charity was in chaos.
Charity accounting software doesn’t often cause such a stir. The problem is more often neglect: many charities invest in the latest fundraising and marketing products, but settle for second-rate software in finance. Cuts have pushed it even further down the agenda. This is dangerous given that charities face ever-more complex reporting requirements. But new cloud-based systems with flexible payment methods are making it easier to access the latest technology.
"The accounting needs of a £1m charity are similar to those of a £20m company because of regulations like the Statement of Recommend Practice and complexities such as multiple currencies, multiple funders and projects that can run over a number of years," says David Membrey, a senior consultant at the not-for-profit specialist Adapta Consulting and former deputy chief executive of the Charity Finance Group.
Membrey says charities with incomes of between £500,000 and £2m require at least basic software, and those with incomes of £2m-plus need more specialist kit.
Cloud-based systems have transformed the market as charities look beyond traditionally popular products such as Sage and QuickBooks, he says. Cloud customers pay monthly or annual fees to use software they never own and which is hosted off-site, rather than buy products hosted on internal servers. The software becomes an ongoing operating cost rather than a capital expense, with basic monthly packages starting at about £25 per user.
Monthly payment can be more palatable to trustees worried about committing a hefty sum to buying software. Charities can increase and reduce the number of users according to need, which is particularly useful for organisations that bid for contracts.
The Citizenship Foundation, which helps young people to be active citizens, switched a cloud-based system in 2014. The organisation, which has 20 staff and income of £1.1m, had lost grants and needed software that could cope with more diverse funding streams.
Ray Ayivor, the foundation’s director of finance and operations, says the Aqilla system it chose provides six dimensions of analysis: supplier’s name, department, programme, account code, name of department manager that ordered it and VAT details.
Ayivor predicts that more charities will have to trade to survive, so the need for better accounting software will increase. "The more you can automate processes and save time, the better," he says. "Even with a small budget, you will be surprised how much can be achieved with the right technology."
His advice? "Look for versatility. Organisations often buy packages based on their current needs, and a year later they’re obsolete. Think about where the charity will be in five years. Get something that can cope."
But he fears many won’t do this. "Charities spend so much time at the coalface that they don’t have time to think strategically. They wait until their current software doesn’t work, then panic buy. Three years later the same thing happens again."
Simon Bull, business development manager and charity lead at Aqilla, says a big advantage of modern cloud systems is that they enable non-finance staff to input accounting information. "It’s fed straight into systems and means finance staff can spend time on business intelligence, not keying in mundane information," he says.
Bull says even risk-averse charities have embraced the cloud and are now more concerned about, say, data security and fraud. Modern software helps. He advises charities entering the market to be wary of consultants: they can over-complicate things, he says. "A £50m charity might need them, but a £2m charity probably doesn’t," he suggests.
Canine Partners, which trains assistance dogs, operates a cloud accounting system that enables volunteer dog-walkers across the country to submit mileage claims and scan receipts to claim expenses. "The key thing you need to know is what you want the software to do," says Gareth Hitchman, finance officer at Canine Partners.
Joanne Farragher, business development consultant at the accounting software specialists Access UK, says most clients, regardless of sector, have the same goal: "They want to provide information analysis in a more efficient and meaningful way."
Farragher says organisations often begin by saying they need a new finance system, but soon discover modern products enable them to do more. "They are not just finance solutions," she says. "They also add value to an organisation. Engage with the wider team and consider what information you need."
Finance directors, she says, still waste too much time pulling together information from different systems. "If they get it right, they can become trusted advisers rather than people who do manual checks," she says.