data integration

Integrations for Financial Systems: The Time Is Now for the Nonprofit Sector

About five years ago, a study was conducted to understand how ‘digitally advanced’ various industries were. The study was conducted by the McKinsey Global Institute and published in the Harvard Business Review. It is not surprising that nonprofit sectors fell into the bottom third of the industries examined, across critical dimensions including IT assets, external engagement, and employee usage/productivity. 

Fast-forward five years, and we find that nonprofits are doing a better job at taking some pages from the playbooks of the commercial sector. They are better at leveraging technology and innovation that give them a smaller – but more effective – IT footprint, at using a broader variety of systems and applications that foster and increase external engagement, and at putting technology in the hands of more end-users to improve process efficiency. 

For nonprofits, we might naturally think of these technology advances as supporting constituent engagement, program management, and fundraising. But advances in the arena of nonprofit financial management have – perhaps more quietly – run with the pack. Best-of-breed technology and cloud-based applications have paved the way for bigger, more complex financial management ecosystems – with more apps that do more stuff and make life easier in many ways, but with more moving parts and more data to capture, record, and reconcile. 

(‘Best-of-breed’ technology is the concept that while the backbone of the organization’s data repository is its main system(s), certain satellite applications generally provide a better solution for certain key business functions, with richer functionality, and a better user experience both for internal and external stakeholders.) 

In 2021, large, well-known, comprehensive financial management systems now share their turf with niche applications, installed because they do certain specific financial functions very well, are cloud-secure, and are inexpensive both to obtain and to operate. The equation that we see more and more often today often looks like: [solid, safe, single-function applications] + virtually unlimited secure cloud storage] + [a robust general ledger designed specifically for nonprofit usage and reporting] = the most functional, flexible, and productive ecosystem for nonprofit CFOs and their teams. 

Why does data centralization matter more than ever? 

I spent a number of years implementing Blackbaud Financial Edge® (today, the far more elegant Financial Edge NXT) before ‘best of breed’ solutions were readily available for nonprofits and while cloud computing was in its childhood. Financial Edge’s hearty and highly configurable general ledger was at the center of a universe that included other Financial Edge modules for accounts payable, banking, payroll, asset management, billing; and likely included Blackbaud Raiser’s Edge® for revenue management. All one neat little package with tremendous strength. Nobody ever had to think about ‘data centralization’ – it just happened when you ran your post. 

Today, everyone still loves the power and the flexibility of Financial Edge’s impressive general ledger, but there are so many new external options for all those other subsidiary functions and features, some that work better for a particular organization’s needs or team, some that are simply less expensive or less complicated, and some that check all of those boxes. 

For CFOs and their teams today, especially in nonprofits that have a variety of revenue streams and other financial transaction flows, this assortment of applications can be a tremendous benefit: financial activities are expedited and stakeholders are happier – including leaders, external partners, and internal team members. But in the background, the notion of data centralization looms larger and larger because none of these great solutions are naturally connected with your general ledger – your data repository for financial reporting and your single source of truth. If transactional data from your various ‘satellite’ financial applications are not integrated into the GL accurately, reconcilably, and on a timely basis, none of the benefits of your ‘best-of-breed’ apps will matter. 

Leveraging integration with subledgers 

But not to worry. The philosophy and logic of subsidiary ledgers are as valid today as ever. As long as you maintain accurate and complete detail in your subledgers, and can effectively tie and reconcile that detail to the summary totals posted into your general ledger’s control accounts, you’re in a good place. 

It shouldn’t matter if that subledger is a legacy ‘module’ of a sophisticated general ledger or an external cloud-based application. Even if you use Salesforce for managing fundraising and/or program revenue, it can be structured as a subledger to your Financial Edge GL with proper design and integration. So can any of those other external applications that you may use to manage invoices, payments, assets, investments, payroll, inventory, budgets, and the like. 

Ensuring your General Ledger data is reliable 

Back in the day, nobody that used Financial Edge had to think about data centralization – users generally used the ‘out of the box’ subsidiary modules, since there were few alternatives. 

But, with the advent of best-of-breed satellite applications, it’s no longer a no-brainer. All of the transaction summary or detail data from your satellite apps have to get posted to the general ledger accurately, timely, and reconcilably – so that the GL remains the single source of fiscal truth and so that precise financial reports and analyses (needed to manage your organization and demonstrate accountability) can be generated in a timely fashion. And there needs to be a cogent audit trail that can tie the entries in the GL back to the sources. 

Manual journal entries are not only time-consuming but are prone to error. And, while Financial Edge has solid native journal entry importing functionality, data outputs from many external systems require manual manipulation before the file can be imported, also resulting in extra work and import exceptions that need to be corrected and rerun (and often corrected and rerun again). 

An integration platform for the nonprofit sector 

The solution – the way to achieve safe, automated, efficient, and accurate posting of detail or summary transactions from external applications – is by leveraging a flexible, cloud-based, secure, and easily configurable integration platform built specifically for the nonprofit sector. Platforms such as Omatic Cloud can safely ingest (ie, pull in) data from any financial application, restructure or reconfigure or otherwise transform it to meet Financial Edge’s journal entry requirements (including your unique required coding), and then transmit it into an open journal entry batch, along with validation reporting that can be used to reconcile source with destination. 

Integration solutions such as Omatic Cloud provide a new level of confidence for nonprofit finance teams. They can feel secure in using a variety of applications in congress with Financial Edge and be assured that transactional data will flow accurately, expediently, and reconcilably from the various sources to the general ledger, so that reporting is prompt and dependable. 

Nonprofits are, in fact, catching up to their commercial-sector counterparts in becoming more digitally-advanced as a sector. Leveraging cloud technology and best-of-breed applications will become more and more common, and will allow nonprofits to be as successful as possible – both internally to become more effective, and externally as they focus on mission delivery. Integration will be needed more than ever as organizations use technology more broadly, to get more done. 

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