After many years experience as a community accountant in the voluntary sector, CAP offers practical advice on this subject.
This fact sheet is aimed at small to medium organisations that are wondering whether their accounting methods may need an injection of computer technology, and perhaps feel apprehensive about such a bold move.
It may be tempting to assume that computerisation will mean the end of accounting problems. The reasons given for computerising accounts generally include saving staff time or other resources, providing better information (for example with more detail or greater accuracy), producing reports and answering queries more quickly.
It is usually clear when an accounting system is failing to meet the needs of the organisation, or when the resources being used seem out of proportion to the results. In some cases, improving the existing manual system may be all that is needed.
However, every organisation is different, so it would be foolish to make hard and fast rules, but the list below gives some of the key criteria, which should be considered before making a decision about computerisation.
If the answer to all three questions is no, it is unlikely you will benefit from computerising your accounts; yes to two or more, you probably will.
If the organisation is small, with a simple financial structure, it should be possible to design an effective manual system (usually based around an analysed cash book) for the main accounting records. There may be areas of work (e.g. subscriptions) with large volumes of repetitive transactions, which lend themselves to computer-assistance within such a manual system.
The best arrangement is to close the old system down at the end of one year and start the next year with the new system. Unfortunately, this means that the busy period preparing annual accounts will coincide with any teething troubles on the computer system. However, with careful planning and preparation, this need not be a major problem.
Planning should begin well in advance: for an April start, detailed preparations should be under way by about September, and it may be necessary to start discussions several months earlier in order to reach an agreed approach which involves the committee, management and key staff.
These early discussions should include a review of the additional resources which will be required to install a new system, for example will it be necessary to bring in outside expertise, and /or temporary assistance? Are there any sources of funding, or free expertise or assistance, for this investment?
Even in the early stages it is worth sounding out your auditors. They may be able to provide helpful advice and contacts from among their clients. This is a good time for networking generally talking to, and visiting, similar organisations in order to learn from their experiences, whether positive or negative.
Many readers will have their own favourite horror stories about computer developments, which have devoured enormous resources in terms of both staff time and money.
However, do not let such stories put you off follow the guidelines below instead.
Some of the worst pitfalls to avoid include:
After considerable investigation and research, I must confess that I am disappointed at the lack of accounting packages designed for small to medium voluntary sector organisations.
I find that most small charities do not need a sales or purchases ledger because they have few regular customers, and most suppliers accounts are very straightforward if paid promptly. What would be useful is a package, which lends itself to a project-based system, because that reflects the structure (and funding pattern) of many voluntary organisations.
In the absence of really suitable software, my approach is to select a simple, popular, fairly cheap, accounting package to do the basic bookkeeping, on double-entry principles, and with a full audit trail to keep track of every entry or adjustment. Although many such packages offer budgeting and reporting facilities, I find it much better to use a separate spreadsheet package which is far more flexible and user-friendly to produce reports of actual expenditure against budget.
When selecting programs, bear in mind the availability of suitable training. Software prices are highly competitive, so look for suppliers offering educational or charity discounts.
In a computer package, income and expenditure headings will be represented by codes (a chat of accounts), which enable you to analyse income and expenditure. This needs careful thought. No two charts of accounts will be the same, but a few general tips may help:
Work back from the reports you want to produce, to determine the most convenient structure and sequence of accounts;
Use different levels of analysis as appropriate perhaps using a separate code for each individuals training costs, but one account code for, say, postage;
Leave generous gaps between codes to allow for new developments.
Almost everyone in the organisation, and perhaps some outside, should be made aware of the new routines. The main training needs will be for those involved in preparing information for inputting for example the person who looks after petty cash - -or receiving output information, for example the members of the committee who read the final reports. If funds are limited, ensure that one or two people receive formal training, and then pass on their knowledge.
Particularly in the early days of computerisation, it is vital that all stages of computer input are monitor scrupulously, so that errors or omissions are caught quickly and eliminated.