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Nonprofits increasingly are following the path of their for-profit cousins and shunning traditional software arrangements for “software as a service” (SaaS) provided over the Internet for a monthly fee. The potential benefits make SaaS worth considering for nonprofits of all sizes, but some caveats are in order.

SaaS in a Nutshell

The definitions of SaaS are plentiful. Generally, it’s best described as software that’s delivered via the Internet to subscribers. A nonprofit essentially leases the software, which is housed on the provider’s servers, and pays a subscription fee. This contrasts with the historical approach of purchasing or licensing an application or suite of applications and having it installed on the organization’s own server, which leaves you responsible for the maintenance and overhead needed to operate the software.

Benefits

Perhaps the primary benefit of SaaS for a nonprofit is that, applied properly, it can free up resources, including time and money, which the organization can use to further its mission. For example, your IT staff could use the time it would otherwise allocate to updating software, a service that’s included in the subscription fee with SaaS, to purposes directly related to your mission. The SaaS provider typically handles system updates and maintenance automatically with a minimum of disruption.

Cost is another major reason more nonprofits are turning to SaaS. The option requires little upfront investment and provides a cost-efficient way to “test drive” software — if you don’t like it after a month or two, you usually can cancel your subscription and get your data back. You also don’t pay for functions you don’t need. Moreover, you won’t end up on the hook for costs associated with building infrastructure, upgrades, maintenance and support. And the monthly subscription model facilitates more accurate budgeting for IT.

Additionally, software provided online means employees can reliably access it from anywhere with an Internet connection, giving them greater flexibility and boosting productivity. Most SaaS providers claim to provide 99.9% uptime.

Potential Risks

As with data stored on your own computers, security is paramount when using SaaS. For instance, how can you ensure protection of donor and credit card information?

The good news is that the right provider can probably offer better security on its closely monitored servers than you could on your own. When it comes to credit card information, the “right provider” is one that complies with the Payment Card Industry Data Security Standard (PCI DSS). PCI DSS was promulgated by the credit card industry’s PCI Security Standards Council and applies to all entities that store, process or transmit payment cardholder data. It outlines technical and operational system requirements to protect cardholder data.

Availability of your data is another concern. Before selecting a SaaS vendor, make sure to research the financial stability and ability of the company to follow through on their promises. Not having access to your accounting system when payroll is due can quickly override any benefits.

Also ask to see a copy of the provider’s Service Organization Control 2 or 3 Report.

They test and report on the design and operating effectiveness of the controls at the SaaS provider that may affect its customers’ data security, availability, processing integrity, confidentiality and privacy. Your CPA can help you decipher the report.

Finally, evaluate the total costs over the long term. Even though your up-front investment is limited, over time the monthly fees may surpass the cost to purchase and maintain your own system.

Contact Us

Your CPA can break down the financial pros and cons for you, too, as well as explain how the switch to SaaS could affect your financial statements by reducing capital expenditures and increasing operating expenses. Looking at the big picture will facilitate a more informed decision. For additional information on our nonprofit services, please contact Jon Moll, CPA at 302.225.0600 or click here to email Jon.  In a brief consultation he can assess your situation and determine the best way to proceed