The following article was originally published by civilsociety.co.uk
Humentum, a leading global non-profit supporting humanitarian and development organisations worldwide, embarked on a far-reaching finance digital transformation project in 2019. In this article, Jocelyn Boughton, Humentum’s Global Director, Finance & Operations, outlines the key project drivers and lessons learned from the experience.
Like many non-profits, our accounting and administrative needs are complex. We have multiple income and funding streams, and we deliver a range of consultancy, advocacy, and training projects around the world. What is more, after Humentum was formed from the merger of three partners (in the US and UK), we continued using different systems and diverse ways of working in each country. Even before the pandemic hit, we knew we had to address how we worked. We had to become more efficient and collaborative, and the only way to do that was to go digital.
One of the challenges in the global development sector is that there’s sometimes pushback against digital systems. Local NGOs, for instance, are often paper-based and used to sending and receiving originals of documents and cheques. In that sense, this is not simply a story about the digital transformation of Humentum. It is a call-out to the entire sector. It is time to embrace both digital systems and changes to the way we work that make our organisations fit-for-purpose in a modern world.
Efficiency and diversity are the two big issues driving digital transformation
We were a remote working organisation before anyone had heard the word ‘lockdown.’ And, like many non-profits, we had people working across the globe. There is just no way to run an organisation like ours as a traditional paper-based finance setup. But the move to digital is not simply driven by the need for efficiencies. There are also cultural shifts happening across the sector.
For international NGOs, it is no longer about having everyone sitting in an office in London or Washington DC. In the wake of the global pandemic and global reckonings for racial justice, all organisations must think about where their power base should be. As Humentum recruits work-from-home employees across the world, we need to bring them all together as one global team. The key driver is the need to decentralise operations and service delivery and create a more diverse, inclusive culture.
The three stages of digital transformation
Stage 1: Take a step back
After having gone through the switch to all-digital with Humentum, I would strongly recommend taking a step back and conducting a thorough audit of your current processes and procedures before investing in any new systems. Digital transformation is not about taking the processes you have and putting them on a digital platform. It is about rethinking those processes, identifying inefficiencies, and then looking at how you can streamline everything.
You must think as if you are starting from nothing rather than just adding to what you already have. If you were setting up a business today, would you choose to have a big office in London? If you were a retail start-up, would you be on the high street? It is that kind of thinking; taking a step back and asking: ‘what is the smartest way to do this, today?’
For us, that involved bringing everybody together to review and map out all our finance processes, such as payroll, expenses, sales invoicing etc. The next step was working out how we would move them onto a digital platform.
Stage 2: Choosing and implementing a new finance system
This is where a deep and broad understanding of your processes and diverse cultural preferences around the world really pays dividends. We found that some systems can be biased toward the countries they are based in. For example, we needed flexibility around registration and payments, as some countries favour credit cards and others bank transfers. Often, these simple things, such as bringing in effortless ways for people to pay, make a significant difference.
Another issue to consider is accessibility. Internet bandwidth can be volatile in some parts of the world, so that can be an issue if you choose a huge, all-encompassing digital platform. It is not just about finding an efficient system that does what you need, it is also considering how quick and simple it is to use in remote areas.
We explored four alternative finance systems: Sage Intacct, NetSuite, Microsoft Dynamics, and AccountsIQ. One of the main reasons we chose AccountsIQ was its ease of use and its simplicity; it is no more complicated than it needs to be. You could, of course, choose an all-singing all-dancing Enterprise Resource Planning (ERP) system (like Oracle NetSuite) that does everything for you. But it can be a costly and complex option.
The other path is to look at smaller systems that meet your key objective of eliminating as much manual accounting work as possible. People often assume that it is more efficient to have one system that does everything. I do not think that is always the case. But whatever systems you choose, they must integrate. Application Programming Interfaces (API) and other potential integrations are often overlooked. But they really are important. One of the reasons our digital transformation has been successful is that our finance system integrates with all our other systems – Salesforce, Arlo, Stripe and iCompleat – through its open API.
Another key factor for us is that, like many non-profits, our users are not always qualified accountants. That is why it is so important to choose a straightforward system. We have found that our team of Project Managers can access the data they need from the system without a huge learning curve.
Stage 3: Focus on continuous improvement
When you undertake a project, you tend to think that there will be a start date and an end date. That is not the case with digital transformation. There is one major project to implement a new system, but there are a series of ongoing mini projects as you find more processes and procedures you can improve.
A good example is month-end. When you do it manually, you tend to process things in batches because that is the most efficient way. Now we are working digitally, we find we are just moving through a constant flow and month-end is just like any other day. That means we have a continual cycle of reviewing our processes and thinking of ways to improve and make it even smoother, more efficient, and real-time.
This ‘always-on’ change mindset might sound daunting, but that has not been our experience. We make small, incremental improvements that are not as onerous as a big, initial transformation project. We still set timelines for these ongoing mini projects because people benefit from a sense of completion.
This continuous improvement stage is a vital part of our digital transformation. Technology is constantly developing, and there are always new things out there that we can use to improve the way we work. That does not mean redoing that whole thing again, it just means building on the work we have done and what we now have.
The impact so far
This project has had a significant impact on our back-office operations and costs. At the start we were able to down-size our team by 1.5 roles, and while our turnover has remained steady, and we have worked through a number of system and process changes, we have not needed to replace them at all. Our month-end process has also reduced from a lengthy 15 days to five days, and I can see that being a three-day process soon.
As we grow, we might need more people but not exponentially, as we have flexibility to grow our capacity without needing to add more personnel. In addition to having a smaller team, going digital also means we have a more consistent online approach. With approvals, for example, once you have hit that approved button, you capture the signatory, which means you never have to track back through emails for audit evidence.
These efficiencies are so important for non-profits dealing with donors and grant funding. One of Humentum’s advocacy areas of focus is cost recovery and indirect rates. With a digital platform, you can demonstrate efficiencies, such as your overhead rate has reduced by x%.
The project has also helped other departments become more efficient. For example, as we have integrated AccountsIQ with Salesforce, our Project Managers can see exactly what their client has been invoiced. They do not need to email finance to ask because it is all linked together; they have become more self-sufficient.
A smooth, efficient finance function makes everyone’s life easier. We have a highly talented team here, and I am keen that they can spend more time on the analytical side of finance and less time on the day-to-day processing. This project has enabled us to do that. Our reporting and month end process is much quicker because we are not chasing paperwork or information from people.
We can see all the information we need in AccountsIQ. We have achieved not simply better reporting, but also quicker reporting. That is helping us be more agile and make key business decisions based on the financial evidence.
Key learning points from the project
We have come a long way since we started this project in 2019. With the benefit of hindsight, I would make a few specific recommendations to other non-profits looking to embark on a digital transformation of their finance function.
- Think carefully about your Chart of Accounts. The temptation is that because you have a new shiny system and you want to be up and running quickly, you just bring your old ways of doing things onto your new digital platform. Taking a step back to review and streamline your processes first will really pay dividends.
- Follow a similar audit and brainstorming process for your management reporting. The coding system in AccountsIQ gives you a lot of options here. We chose to get reports showing exactly what is happening across our different service areas, locations, and products.
We now clearly understand what consultancy, training, support, and membership services we are providing to which organisations and countries. And all with no manual work or manipulating transactions and bringing it all together in Excel. A digital transformation project is a terrific opportunity to re-think what business intelligence is most important for your organisation.
My main takeaway has nothing directly to do with technology. The key success factor is not so much which system you choose; it is how you review all your procedures and processes. Success lies with people more than technology. Bringing everyone’s minds together first will ensure no matter what system you choose; you are on the path to greater efficiency and effectiveness with your move to digital.
Check out our SocialEx episode on digital transformation with Sarah-Angel Johnson.