Error-Prone and Unreliable Spreadsheets Are Dangerous to Nonprofit Organizations
Think about it: Without software, your cell phone, computer, and television would just be boxes of circuits and hardware. Software lights and heats your home, and powers your city’s water supply — it’s incredibly powerful. So when Tim Worstall, Fellow at the Adam Smith Institute and Forbes contributor, called Microsoft Excel “the most dangerous software on the planet,” he had a good reason.
According to Worstall, spreadsheet-heavy software like Excel is too difficult to manage. “It’s handled in such a slapdash manner that no one is really on top of it anymore.” A lack of controls, inaccurate information, and manually copy-pasted numbers within spreadsheets are too often to blame for financial errors.
Worstall’s essay was published in 2013, years after studies from the University of Hawai’i found 88 percent of spreadsheets audited over 13 years were riddled with errors. Businesses are still making dangerous mistakes. And though nonprofit organizations should operate like businesses in some regards , relying on spreadsheets should not be one of them.
4 Reasons Nonprofit Organizations Should Avoid Spreadsheets
1. Spreadsheets are not designed for nonprofit accounting.
Nonprofits need software that does more than add, subtract, and average numbers. Every donation that comes in must also be tracked. To further complicate matters, donations come from a variety of sources, and every donation is given for a certain purpose.
In order to maximize contributions, you must track each donor. Simple enough, when you first started and had only a few donors to keep track of. But now that you have hundreds — even thousands — of donors, those once easy-to-manage spreadsheets are now time-consuming and prone to error.
2. Spreadsheets can’t accurately or automatically track every dollar spent.
As a nonprofit organization, you’re duty-bound to make every dollar count. But you can’t allocate funds wherever you need them most. Most donations are meant for specific programs and projects. Your donors get to decide where in the organization their money will go.
But what happens when an individual gives to more than one program or project from the same donation? It won’t be long before juggling spreadsheets becomes too much to handle. Nonprofit accounting software can show you a complete financial picture, while keeping funds separate and organized.
3. Spreadsheets aren’t made to generate reports.
If you think spreadsheets are difficult to manage with a few hundred donors, just think about how your spreadsheets are going to stand up to larger donations made by foundations and corporations. In 2014, $71 billion were given from corporate and foundation donors, as reported by the National Center for Charitable Statistics. Can your spreadsheets handle those numbers?
Corporations and foundations aren’t like individual donors. They will hold you accountable and expect regular, professional expense reports, not lengthy and disorganized spreadsheets that are easily manipulated. These donors need assurance their generous investments are being used to serve the mission. Nonprofit accounting software can generate accurate reports that don’t waste time or resources.
4. Spreadsheets can’t follow rules and regulations on their own.
When it comes time to maintaining your nonprofit’s tax-exempt status, the Internal Revenue Service (IRS) is going to need a few things. Your financial records, previous filings, board meeting minutes, bank deposit slips, invoices, account statements, asset records, and more will determine whether you stay tax exempt. Plus, each document must be filed, sorted, and labeled accordingly.
All that is just what the IRS requires. Your state and local governments have their own set of rules and regulations, and you have to prove you have complied. When it comes time to compile all numbers and documents needed to keep your nonprofit running, your spreadsheets are only numbers in boxes.
Spreadsheets Are Ineffective for Successful Nonprofit Organizations
When it comes to serving your nonprofit’s mission, there’s no use in cutting corners. You need the right nonprofit accounting software. Neither spreadsheets nor the average for-profit accounting software will do the job right. Your needs are more complex than the needs of the average small business.
Cougar Mountain Software’s Denali Fund is specifically designed for nonprofit organizations. With accurate reports from Denali Fund, you can make your board members and donors happy, keep your tax-exempt status, and protect your organization from software prone to error.