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Transitioning to cloud accounting

In 2019, we wrote about the rise in popularity and the advantages of cloud accounting, and now in 2020, due to the global pandemic increasing the need for remote working, cloud accounting has become the norm, and even essential.

In our article last year, we considered the many advantages that the cloud-based accounting systems, such as Xero and Sage Business Cloud Accounting can bring to non-profit organisations. Since then we have worked with more organisations to either set up for the first time or transition from desktop based systems, and we have been learning along the way.

Design is essential

As with most systems, design is essential.   No accounting systems, particularly for non-profits, can simply be used as is.  The chart of accounts has to be designed and set up to meet the particular management and reporting needs of the organisation, and as each organisation is different, these needs also differ.

Most accounting systems accommodate separate tracking of different programmes, projects, regions, and/or funders but only if designed and set up to do so.   One organisation decided rather too hastily to convert from Pastel Partner to Sage Business Cloud Accounting, only to realise that their projects as set up in Pastel had not been set up and linked into Sage.  This resulted in loss of critical management information and wasted resources, as they had to revert back to the old Pastel system.

The conversion of data from one system to another is relatively simple, however, the conversion must be carefully planned and the new system must first be designed to accommodate all the information, such as accounts, programmes, projects, and or funders.

Supporting documents can be stored electronically, but always systematically

One of the advantages of both Xero and Sage is that supporting documents can be attached electronically to each transaction in the system, instead of filing documents separately (although the method and stage of attachment in the procurement process is different). This simplifies checking and auditing of records.

We have found that the Xero system of attaching documents through the payables system (using “bills” which are electronic payment requisitions) is efficient and able to facilitate organisational payment processes.   On the other hand, for non-profits that are used to maintaining records on the cash basis, that is, they only record transactions at the point of payment or receipt in the cash book, a change to the Xero payables system is more of an adjustment.  We found that initially errors are made, such as recording the same transaction as an expense twice.  Xero requires the understanding of basic bookkeeping in order to load transactions first as a bill (with a unique reference number) and then to allocate the payment against the bill.

Even if organisation don’t store their financial documents in a cloud accounting application, there are other cloud-based storage facilities available, such as Dropbox and Google drive. Once in the cloud, these can be shared with their accountants or any other authorised person needing access, such as the auditors, without having to courier paper originals back and forth. 

Just a reminder that whether the filing system is paper-based, electronic, or in the cloud, a systematic filing system is still required! We strongly recommend use of unique reference numbers in order to link transactions in the accounting system to a specific document that is filed numerically and systematically.

So, which would it be?

Sage Business Cloud Accounting is very popular for non-profits, mainly because they can subscribe to the system for free. Although the number of users may be limited, it is perfectly adequate for smaller organisations.   Xero also continues to gain popularity amongst organisations, despite the small monthly subscription cost in US dollars.

We have found that both these systems allow for the tracking of different projects and/or funders, provided they are well-designed and set up to do so.   We have experience in the design of accounting systems to meet the financial reporting needs of non-profits, and have done so using these two cloud-based systems for a number of our clients and because of the cloud-based nature, we can work with any client in South Africa.

Give us a call or email to discuss how we can support your organisation in moving to a paperless cloud-based filing and accounting system.

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