Accounting APIs: sharing the wealth of who, why, and how much?

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AS the nonprofit world has become more sophisticated, there has been a corresponding increase in operational complexity. This has become increasingly acute in financial operations.

Once upon a time the accounting department often played an isolated and reactive role in tracking and reporting on receipts and disbursements. Only after a new fundraising initiative or service was put in place would financial staff be drawn in the process to deposit the money and track expenses. This kind of separation was effective in situations where information primarily flowed in one direction and totals agreed.

Every outcome or impact, whether it is improved math grades, months employed, or increased community vitality, now has a financial component attached--usually with the question "how much did it cost?" Strategic decisions now involve numerous tactical dollars and cents considerations for the full range of internal and external stakeholders.

"The increased demand for performance metrics and measurement and return on investment (ROI) has increased the stake of the accounting office. It is more of a partner with other parts of the organization in producing reports and developing metrics and is more likely to suggest new ways of looking at data," said Andrew Payne, product manager for The Financial Edge product at software publisher Blackbaud in Charleston, S.C.

Smart managers are bringing financial staff to the table as part of the process of evaluating new programs, fundraising initiatives, and other activities. The point is to insure that the right systems are in place so that financial transactions can be integrated to a level where stakeholders have access to information when they need it.

Improving the connection between front-line applications--the client--or donor-facing software that collects or disperses money--and accounting systems improves the timeliness of information and reduces errors from duplicate data entry. However, defining roles and responsibilities, along with the associated turf battles, can be difficult and make technology decisions even more critical.

According to Bonnie McLain, Sage Software's director of product management for Sage Fundraising 50 and Sage MIP Fund Accounting in Austin, Texas, "Frequently, the finance people are the people who say no. They tend to be risk averse and need to make sure that all of the pieces are in place to successfully support the idea or program."

There are many opportunities for connecting source data to accounting systems available and run the gamut from simple imports and exports data to sophisticated Application Program Interfaces (APIs). It runs even on to completed homogeneous environments where data are stored in a common database that all applications share. "There is a shift towards more collaboration. Our customer base is becoming more interested in having control of the data, and it's more of an expectation that the data they have can integrate with other critical applications" said McLain. "Nonprofits have a valid expectation that their vendors provide technology to achieve the desired level of integration."

APIS--MAKING CONNECTIONS

APIs are software protocols that allow applications to share data. The ability to import and export data or create a spreadsheet from your accounting software are examples of simple APIs. More advanced APIs allow one application to perform more complex manipulations on data in another program. The APIs available today tend to be very complex and consequently expensive to implement. Thus, the decision to proceed should be based on a thorough understanding of the costs and benefits.

Blackbaud's Payne observed: "ROI depends on the scope of the project. Even simple projects can free up staff to do more valuable things. Once an organization has software with published APIs, they're effectively building a system that is functioning as a cohesive unit where they can enter data in any place and have access to it in any number of other places."

Brandon Taylor, vice president for development at Serenic Software in Denver, Colo., sees APIs as a stepping stone to even higher levels of integration. "We'll see some revolutionary changes in the next few years--it will be like going from DOS to Windows. Accounting will be more proactive, they'll be able to provide more information in real time to help decision making."

CASE STUDY--FOUNDATION FOR SIMPLICITY

The Albert Pick Jr. Fund (APF) is a Chicago foundation that maximizes its grantmaking by working to reduce operating expenses wherever possible. One bottleneck in the grants management process was synchronizing data between the database that tracked funding requests and the accounting system.

Like many organizations, the APF had one software program to manage the grant process from submission through the authorization and payment of awards, and a separate accounting system. The overlap between the two systems consists of the grantee, funding areas and amounts. For grantmaking, the information is part of the larger process of matching resources to community needs; for accounting, it is one part of the larger financial picture.

While it was a simple chore to copy payment information from the grants database reports and manually enter them into the accounting program, that strategy had two of the most common shortfalls. Retyping information can lead to data entry errors, such as transposed numbers, skipped records, and misclassification of data (where a grant approved for the Health and Human Services category might be entered under Education). Second, the time spend on re-keying data was double work, time that could be better spent.

The decision was a simple one for APF's Executive Director Cleopatra Alexander: invest some time and money in automating the synchronization between the grants management system and the accounting system. "We try to promote a culture of efficiency that minimizes administrative overhead so that we can maximize the number and size of awards we make. I was enthusiastic about the idea as was our part-time accounting manager, who wanted to reduce the number of hours billed on re-entry."

Another opportunity the APF explored was enhancing reporting functionality. "While the financial side of the grantmaking process is important, there were other aspects of our program of giving that we wanted to include in the budgeting and evaluation process."

The APF uses Peachtree by Sage Software for accounting and a custom Microsoft Access database for grants management. "While Peachtree is wonderful for the accounting, I'm not an accountant and didn't want to learn a second program to do any kind of analysis. I was already using the Access database to manage everything from accepting and acknowledging the applications through producing the board book for our meetings. Adding a budgeting component and some additional reporting to our grants management process allows me to quickly look at individual grantees, the money they've received, and their impact in a holistic way. Having both programmatic and financial information about a grantee at my fingertips lets me answer questions more quickly without having to look in multiple places."

The integration of the grants management database with the accounting systems started with laying out basic requirements. The number one need was to be able to produce award checks quickly after the board meetings. This meant that information about the payee and award amount would have to be moved from the grants management database to Peachtree. Likewise, Alexander wanted information about the check number and date issued returned to the grants system for easy reference. After comparing the requirements with the features available in each of the software, staff decided on a process that would export two files from the grants system and import one file back.

The first export was the list of payees, which Peachtree regarded as vendors. The vendor import feature evaluates the vendor ID or account number and compares it to the existing list. If it finds an ID already in the system it will update the existing name, address, and other information. If the ID isn't found, the new record is added to the vendor list. To take advantage of this feature the APF made a business rule to only add or update grantees/vendors in the grants management database. When a grantee or other vendor changed addresses their contact information would be automatically updated in the accounting system the next time records were synchronized. In effect, the grants database became the database of record and the accounting system became a copy that could print the names on a check.

The second export was the list of authorized payments to grantees. This list has the vendor ID, amount, fund, and other information necessary to create the check and record other financial information. Once both files have been imported into Peachtree, the accountant verifies the payees and amounts and prints the checks. After the checks are created, the software generates a file listing the issue date, vendors, amounts paid, and check numbers which is used to update the grants management system.

"Having the check numbers and dates in the grants database makes it easier to answer grantee questions should they arise, and it serves as a double check that the right organization got the right amount of money," said Alexander.