How Spreadsheets Harm a Nonprofit’s Success
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, relying on spreadsheet-heavy software like Excel to manage more than small projects is not a good idea. “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. Organizations of all kinds are still making dangerous mistakes by relying heavily on spreadsheets.
We put together the top reasons how spreadsheets can hurt a nonprofit’s success.
Spreadsheets are not designed for nonprofit accounting
Nonprofits need software that does more than just adding, subtracting, and averaging numbers. To maximize contributions and plan for the future, you must track each donor. Simple enough, right? When you first started, you only had a handful of donors to keep track of. But now, you have hundreds or thousands of donors to manage, and those once easy-to-manage spreadsheets are now time-consuming, at risk for errors, and, let’s be honest, a headache.
Spreadsheets can’t accurately or automatically track every dollar spent
You’re duty-bound to make every dollar count. Your donors expect it. The board expects it. But you can’t always allocate funds wherever you need them most. Many donations are earmarked for specific programs and projects and you can’t use them for anything else. Juggling spreadsheets to try to track all these different funds and projects is cumbersome and a mistake waiting to happen.
Spreadsheets aren’t designed to generate reports
If you think spreadsheets are difficult to manage with a few hundred donors, think about what’s going to happen to your spreadsheets when larger donations made by foundations and corporations begin to come into your organization. In 2014, $71 billion was given from corporate and foundation donors, as reported by the National Center for Charitable Statistics.
Corporation and foundation donations aren’t like individual donors. They will hold you accountable and expect regular, professional expense reports—not lengthy and disorganized spreadsheets. These donors need to have confidence in your organization and know their generous investments are being used in the ways they want them to be. How are you going to generate these reports? Can your spreadsheets handle it?
Spreadsheets can’t follow rules and regulations on their own
When it comes time to maintaining your nonprofit’s tax-exempt status, the IRS requires a lot of documentation. Your financial records, previous year tax filings, board meeting minutes, bank deposit slips, invoices, account statements, asset records, and more, will all determine whether you stay tax exempt. Plus, each document must be filed, sorted, and labeled accordingly.
That’s just for the IRS. Your state and local governments have their own set of rules and regulations you must comply with. When you need to compile everything, your spreadsheets are only going to show you numbers in boxes.
When it comes to fulfilling your organization’s mission, there’s no use in cutting corners. You need the right tools and software behind you to help you succeed. Neither spreadsheets nor the run-of-the-mill accounting software will do the job how you need it to be done. Your organization and its mission deserve so much more than spreadsheets to succeed.
Denali Fund is a complete accounting solution specifically designed for nonprofits. To learn more, contact Cougar Mountain Software at (800) 388-3038 or sales@cougarmtn.com.
Make sure to check out our blogs on essential tools for nonprofits and why GAAP accounting is important.
