Wednesday, 17 August 2022
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Wednesday, 17 August 2022

What is the difference between on-premise and cloud-based finance software for nonprofits?

By Paul Sparkes, commercial director at true-cloud accounting software provider, iplicit.

The Charity Digital Skills Report 2021 revealed that while 60% of UK charities now have a digital strategy in place – compared to 49% the previous year – 28% of organisations are ‘starting out’ and developing their use of digital, without a strategy.

When asked what the biggest barriers to digital change were, respondents cited IT – hardware and internal systems – and lacking the digital skills or expertise as the top three.

This backdrop to the sector is incredibly important when looking at the topic of digital change – specifically where finance and accounting systems are concerned. 

Taking these solutions as one example, there are so many options – from on-premise to the different types of cloud. So, how can charity finance and IT teams be sure that they have the right one for their organisation?

It all starts with removing the jargon and understanding what each option means, so you can see exactly what the different solutions can offer your nonprofit.

Naturally, charity finance professionals want peace of mind that data is accessible in real-time – from anywhere – and that all your complex funding and grant management processes and partial VAT calculations can be dealt with efficiently.

Here is some insight to help you cut through the noise and find out what you need to know about each possible system type.

What is an on-premise finance system?

Known as on-premise – or legacy – finance software, this essentially means the software application is stored on a local server at an organisation’s premises.

This ‘brick-and-mortar’ solution was extremely popular before the introduction of cloud technology and flexible working, but it typically requires extra IT support – people on the ground to maintain the server(s) – and regular upgrades and maintenance costs need to be factored in.

Nonprofit finance directors and teams require quick and easy access to reporting to fuel accurate decision-making – and this can be held back by the limited capabilities and ‘clunky’ functionality offered by an on-premise finance solution.

For instance, there are still tens of thousands of organisations that ‘make do’ with the technology they have, applying ‘sticking plasters’ to their on-premise tools – in the form of a multitude of manual workarounds, myriad Excel spreadsheets, and a general acceptance that processes such as reports take weeks rather than hours. 

Many nonprofits also export data each month to then share department/project actuals versus budgets. Not only is this very manual, but it makes finance responsible for getting and preparing the data.

Simply accepting these lengthy, clunky processes is what hinders growth and productivity in the long run, as there is true cloud accounting technology that exists and enables all stakeholders to self-service information – in turn freeing the finance function from this labour-intensive task.

What is a true cloud-based finance system?

The important thing to note is that there are two very different types of cloud that charities need to be aware of when procuring a new solution – true and fake cloud.

Starting with true cloud infrastructure – also known as cloud-native – this has been built specifically with ‘cloud-first’ in mind.

It’s there to streamline processes and maintain reliable information for users to dissect and make organisation-critical decisions from, as well as include data that can be shared across the entire digital ecosystem. This means you have ultimate flexibility because you can access it from any location, in any browser, in a highly secure manner.

Additionally, true cloud facilitates access to global, seamless updates, so you’ll never miss a beat nor be working from an old system or clunky version again. And its digital-first capabilities allow for the provision of constant, secure software upgrades without impacting your organisation’s customised configuration.

What is a fake cloud-based finance system?

In contrast, fake cloud struggles with integration into other cloud-based systems. The reason for this is that it was never really designed to exist in a modern cloud world in the first place. Instead, it was architected to be an on-premise solution that could be adapted to work in a limited fashion, in a cloud environment.

On the surface, it may appear to look like its true cloud counterparts, but the performance and troublesome integration can be an instant giveaway. You’ll soon discover that it simply doesn’t fit the bill for today’s agile, flexible, and hybrid working model.

With everything heading in the direction of digital too, these fake cloud systems are quickly becoming outdated and obsolete. So, while right now it might feel like a short-term fix, it’s not the stepping-stone you require if you want to equip your finance team with a solution that can cope with the long-term requirements of your organisation, in a highly secure manner.

So, if you are looking to upgrade your existing system – on-premise or otherwise – be mindful that, unlike cloud-native software, unagile legacy products are unable to offer the depth of financial detail and visibility that’s required by your industry’s regulators, supporters, and donors.

To find out more about iplicit’s cloud-native finance software and some of the charities that use it, visit the website.

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