BUCS Fund Accounting Software

Fund Accounting Software Checklist
By Don Frey

Frey & Company has been in the software business since 1974. We have been designing, and writing fund accounting software for most of that time. Prospective clients typically call and merely ask for some information. They often don't have any criteria that they are using for selection. This paper is intended to give the shopper a checklist of points to consider when searching for this very specialized software. The list is not all-inclusive. However, it is a good starting point for one's needs. If you are unsure about what fund accounting is, visit our page describing "What is Fund Accounting?".

Organization Type
Fund Accounting software tends to be divided into two major groups, government and nonprofit. Government fund accounting requires additional restrictions and controls not required for nonprofits. Nonprofits require special reports and distributions that are not needed by government agencies. Make sure the product you are reviewing specifically states that it is designed to meet the needs of your organization.

User Interfaces, Character or Graphical
The Character interface is offered on mainframes, MSDOS, PCs, etc. It has little in the way of implementation standards. The way it looks and works is purely up to the developer. You learn these applications "from the ground up" because they all behave differently.
Microsoft's Windows is the most popular graphical interface. By Windows, I mean Windows 95 and later and NT. These implementations not only offer a consistent look, they also provide a consistent feel, if the standards are followed. If the developer follows the Windows design guidelines, you can generally move from application to application without much trepidation.

The clear graphical interface implementation choice is Microsoft's Windows. Be careful, not all Windows applications have followed Microsoft's design guidelines. Products that have these Microsoft features are known as True Windows products. Be sure to ask this question of prospective software suppliers. And, if the application originated as a Microsoft Windows 3.X application, ask if it has been updated to the newer Windows standards.

Operating Environment
Is a single user system adequate, or is a multi-user system required? If a single user system is adequate, you have the following choices: MSDOS, Apple, Windows or Others.
MSDOS is dead. It lacks the powerful features and stability found in today's software offerings. Selecting an MSDOS product would be like buying an out-of-date computer. It simply would not be a wise investment.

Apple systems have been popular over the years, primarily in the printing, design and graphics industries. They have never held a material share of the business systems market. Very little business software is available for Apples.

Microsoft's Windows dominates the market. Most computer literate people know how to use them. Business software is readily available.

Other systems, mostly proprietary, are still available. These are leftovers of a bygone era in computers. Avoid them.

If you have a need for a multi-user system, you have a number of choices: Novell, Microsoft's Windows peer-to-peer and NT, a variety of UNIX and others. I am only going to discuss graphical based systems because that is the state-of-the-art technology.

For a small multi-user system (less than five users) a peer-to-peer is inexpensive and works fine for low volumes. You will probably save about $3,000 by using a peer-to-peer operating system. They are easy to set up and manage. The downside is they are slower than client/server systems and only allow basic sharing of printers and disk space.

Larger multi-user systems are Microsoft's NT (Windows 2000), Novell, Linux and UNIX. Windows NT is currently the most popular. Microsoft is pushing NT as the heavy duty server of choice. For years, Novell dominated this market. However, their market share has been slipping. UNIX/Linux is the most mature product. It is powerful, robust and a good performer. If you select one of these products, be sure they can provide a Microsoft Windows client interface. Otherwise, you will be faced with an inconsistent user operating environment.

There are other systems such as IBM's AS400, Pick Operating Systems, etc. These system offer limited and expensive approaches. They do not offer technology consistent with the direction of the industry.

A final word of caution is in order. Local area network systems, while offering graphical interfaces and more powerful hardware, do not currently out perform character based systems. This is an architectural problem that is being solved by thin client designs.

Hardware
The software supplier should be able to offer you some guidance about the equipment requirements for the application. Don't expect them to give you exact brand and model requirements. The industry changes too fast for that level of direction. However, processor speeds, memory, disk requirements and connectivity recommendations should be readily available.

Fund Accounting Software Provider
Check out the firm. Don't make assumptions.

• How long have they been in business?
• How long have they been providing fund accounting solutions?
• Did they develop the product or do they merely modify and resell it?
• Is fund accounting their main product or is it just an adjunct to another piece of software? Some firms main focus is on fund raising software. They offer fund accounting only because they need to compliment their flagship product. This is an indication that the fund accounting will be of a lesser quality.
• How does the company provide day-to-day support?
• How often do they update the product?
• Do they provide high quality documentation? Documentation is a complex and time consuming process. It is very important that good documentation be supplied. It is also highly desirable that the documentation be available on-line in an easily searchable form.

Software Features
The items listed here are features that distinguish a good fund accounting system from a commercial application. Items like general ledger, accounts payable, etc. are not mentioned because both commercial and fund accounting systems need these capabilities.

• Is it a TRUE fund accounting system or is it a modified commercial application? A good fund accounting system needs to be developed from the ground up. Some vendors offer commercial systems with fund accounting "overlays". If this is what they are selling, be leery of the product.
• How long has the product been on the market? New products may have more Flash, however they tend to be less stable. Look for a balance between the two. More mature products also tend to be more feature rich because they have received many enhancements over a long period of time.
• Is it a batch system or real time? This is very important, especially if you are a government operation. Real time processing is necessary to check budgets, spending limits, etc. because government budgets are legislated. They are the law! Nonprofits can also benefit from real time processing because it is generally much faster. It eliminates processing steps, saving time and money.
• Has it been designed and programmed using Microsoft's Windows 9X design guidelines? If the guidelines have not been followed, the product may look like a Windows application, but does not work like one. This makes for more difficult learning and day-to-day usage.
• Does it have a large free form account number? Most fund accounting applications require additional groupings and breakdowns. Commercial account numbering schemes are often inadequate.
• Can it handle both cash and accrual basis funds concurrently? Many operations require this ability. Example: a museum gift shop needs to be on an accrual basis, but the general fund needs to be on a cash basis.
• How large can the amounts be? Some low end products cannot handle the large figures required for fund accounting. The system should be able to handle numbers up to 1,000,000,000.00.
• Can the system handle the number of funds required? A good fund accounting system should not have a limit on the number of funds.
• Does the software offer security? Application access should be regulated by program and user.
• Is it portable? It should be upgradable or movable from system to system without conversion.
• Can invoices be paid from multiple funds using a single check? Many commercial and low end fund accounting systems fail this test. It is a very important feature. It can drastically reduce the number of checks being written.
• Can multiple checking accounts be used, if necessary? Some organizations need to be able to maintain multiple checking accounts.
• Is Grant/Project tracking available? Grants and projects often require different reporting requirements. They must be reported for different periods. They also require reporting on a to-date basis for the life of the grant.
• Does it process encumbrances? This is an absolute must for many government operations. And, if you encumber, the system should definitely have real time processing.
• Does the budget planning allow for global changes? Fund accounting operations tend to have a very large number of accounts. Global change capabilities allow the user to quickly create and change budgets with a minimum of input.
• Do the available reports meet the needs of a fund accounting operation? Fund operations need revenue and expense reports in addition to the standard reports offered by commercial systems. They depict comparisons between actual revenues and expenses versus budgets.
• If you are a nonprofit, does the system support FASB 177 reporting requirements?
• If you are a government, does the system support GASB 34 reporting requirements?

Price
Price is important. However, don't confuse price with value. Systems with lower prices often do not offer the depth of capability that more expensive products provide. Software pricing varies tremendously. Some products are offered at a single price, regardless of the number of users. Others are priced on the basis of the number of users concurrently accessing the system. Some charge based on the number of users that will be accessing the system.

Modular pricing is also quite common. This method is often used for large software systems. The components are broken down into modules so that the client can purchase only those modules required for that organization.

Careful consideration needs to given to support and updates when evaluating pricing. Our firm provides a toll free number in the US for support. Unlimited phone support is provided to clients who have completed the training course on the system. An annual update is included in the price of support for some firms. Others place an additional cost on the update, which can become quite expensive.

Training costs should be checked. Some firms offer reasonably priced software, but have very expensive training fees. You may want to check the cost of training at the vendors facility versus training on-site.

Some firms urge you to engage them to set up and install the system. A good system should not require an outsider to perform such a service. The product should be easy enough to use that the existing staff can set it up without difficulty. If a vendor suggests such a service, ask why the system is so difficult to set up.

Calculating The Cost:
One should evaluate the cost on a five year basis to get a realistic picture on the investment.

License Fee: The charge for the software license, which should be a one-time cost.
Modification Fees: The charge for adapting the software for your operation.
Installation: The one time charge for installing the software on the system.
Training: The one time charge for teaching you how to use the software.
Annual Support: The charge for providing technical suppport and product updates, multiplied by five.
The above items should then be totaled to give you a reasonable cost figure for a five year period.

Is It Right For You?
After the foregoing points have been evaluated to your satisfaction, you need to make a selection. This part of the process involves product demonstrations, reference checks, etc.
Product demonstrations can take on many forms. Many of the so called demos sent to prospects are nothing more than slide presentations. They may convey a list of features but don't demonstrate how the product behaves in-use. This presentation is not adequate for one to make a decision.

Another form of demo is a limited version of the software. This is sent to the prospect along with demonstration data for evaluation. This is much better than the slide presentation. However, it really doesn't allow the prospect to interact with the product very effectively because of the limited nature of the demo and data.

A live demo, put on by a salesman at your site, is convenient and allows you it interact with the product. Unfortunately, this is often not practical to accomplish unless the firm is local. Even then, the local representative may not have the in-depth understanding of the system you want.

Remote demos are available from some firms. This is a good alternative to the live on-site demo. This type of demonstration allows the salesman to run the demo on your system over the phone while discussing the products functionality. He can deviate from the standard demo to illustrate how special situations can be handled. This is equivalent to the on-site demo with one additional advantage, he can readily call on support personnel if he needs help in answering questions.

The last alternative is for you to visit the software firm for a demo. This is probably the best means of evaluation. It not only allows you to get a highly interactive demo, it also lets you see the company's organization. You have an opportunity to speak directly with sales, support, technical and administrative personnel. You get a much better feel for the company with such a visit.

Finally, do you feel comfortable doing business with them? Do you feel they are competent, sincere and have a real desire to meet your needs? Good luck!

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