The COVID-19 pandemic has been a stark reminder of the risk nonprofits assume if they do not proactively invest in new technologies to address financial and operational threats. The rapid shift to remote work environments exposed major issues such as internal controls that were insufficient to protect against fraud, and antiquated systems that could not support productivity and demand.
Many of these vulnerabilities were found in nonprofits’ finance functions. Fortunately, there are cost-effective technologies and processes that organizations can consider adopting to address these insufficiencies, even as they continue to operate with remote or hybrid workforces. Two of the most cost-effective and impactful changes a nonprofit can make are:
Utilizing a third-party Accounts Payable (AP) provider. A large area of opportunity for fraudulent activity is the use of online bill pay, which brings increased convenience but also increased employee access and cybersecurity risks. An online third-party AP provider, with appropriate cybersecurity controls in place, could supply a platform that would enhance the security and oversight of the money flowing out of the organization and strengthen the internal controls over the AP function.
Such platforms allow for the digitization of the same activities performed by in-house staff: receiving invoices from vendors and trafficking them through the approval and payment process. Added safety measures include separate logins and permissions for all users, implementation and enforcement of review and signature thresholds, and bypassing the need for internal staff to ever touch the funds. In addition, online AP providers allow organizations to store signatures on file for authorized signors, allowing them to approve invoices for payment wherever they may be. An online AP provider also creates a segregation of duties that might otherwise be impossible in a small nonprofit with limited back-office support.
Migrating to a cloud-based general ledger. During the pandemic, remote accounting staff have also experienced bottlenecks and decreased productivity as users have grappled with Internet bandwidth, insufficient upload capacity and other hurdles that have kept multiple users from simultaneously accessing the platform. If this was your experience, consider upgrading to a cloud-based general ledger. Benefits include the ability to store copies of invoices and receipts within transactions, elimination of costs associated with maintaining and securing a server and running a VPN, read-only or report-only access for added security, and auditor access for a smoother year-end audit process.
These technologies, along with accompanying cybersecurity, automation and internal control policies, are several ways you can help your nonprofit streamline processes, strengthen controls and generate more efficiencies during and after the COVID-19 crisis. But like most technology implementations, careful planning and preparation are key to getting the most out of your investment, as even the best choice for your nonprofit can be underutilized or inefficient for the organization’s needs.
This article was originally published in the April 2021 edition of BBB Foundation News.