Integrating Fundraising Databases with Accounting – or Not

On the Information Systems Forum – a great email discussion list about IT for nonprofits - there’s been some interesting discussion about integrating the software that tracks your fundraising program with your accounting software. And it turns out that detailed integration may not be desirable.

The question posed to the list was, in summary, what accounting software packages work well with the fundraising software Raiser's Edge?

Tim Mills-Groninger, Associate Executive Director of Lumity (formerly the IT Resource Center) and a guru of nonprofit database topics, had this to say:

The overlap between fundraising and accounting is actually quite small; the dollars raised are a tiny part of the whole development machinery and the allocation of gifts within the accounting system can be in many cases quite trivial. Of course with many nonprofit activities the simple and trivial can be made complex and cumbersome - I'm just saying that it doesn't have to be.

In our practice at Lumity we tend to look at the fundraising and accounting problems separately. General vs. Fund Accounting? Not a development problem at all. Talk to your auditor and funders and look at the kind of encumbrances and cross period reporting you need to do. If you're spending a lot of time in Excel to explain and report on restricted financial activity you have the wrong accounting software. Kevin Hite at Deltek even gave it a name: the Excel Monster.

Since you've already selected a fundraising package I'll assume that you have an advancement services plan that supports the development plan. What we look for are indications of volume and complexity of gifts, and volume is the least important. Significant processes are going to include the extent of donor restrictions, quid pro quo issues, and the pledge write off procedures. If you're getting 1,000 gifts a day (as some higher ed offices do), but they're all unrestricted annual fund contributions, then life is pretty sweet. Conversely, if you have donors making gifts all designated to replacing lost left mittens of needy children your gift/accounts problems just got a little bigger. Quid pro quo considerations can transform a gift into a purchase pretty quickly, and rise of Donor Advised Funds have made pledge management a nightmare for some organizations.

Once classification and work flow considerations have been established it's pretty easy to decide on the best method to get gift and payment information from Raiser's Edge to any number of accounting programs. RE gives you any number of export options that most accounting packages will accept. I strongly advise that you post gifts prior to export - I don't know why so many development shops decline to do this important step - and that you only import aggregate data by deposit and fund into the accounting system. RE is for gift detail, the accounting system is for summary by batch, and the batch or deposit number is where the two meet.

The key to a successful accounting/fundraising software relationship is the congruence of funds and restrictions, and there are dozens of ways to solve that puzzle that allow you to pick the best of breed accounting solutions that meets all of your agency's management and accounting needs.