Modern Enterprise Resource Planning (ERP) systems empower organizations of all sizes, structures and industries when it comes to financial and operational management. However, some industries suffer unique challenges, particularly those that provide goods and services worldwide. International non-governmental organizations (INGOs) are typically nonprofit organizations established to serve a purpose and achieve objectives on a global scale. Such goals can include aiding or advocating for a humanitarian cause, protecting an environment and its wildlife, as well as providing healthcare or financial services to developing nations. The missions of these organizations span international borders, sometimes requiring operations in either remote, underdeveloped or even high-risk areas. Due to the unpredictable nature of INGO work, business transformation through ERP system modernization can be challenging for these organizations.
The world’s most impactful organizations utilize ERP systems to streamline operations across industry-standard business cycles, such as opportunity to cash, procure to pay, record to report, plan to deliver and hire to retire. In fact, according to a survey of INGOs, which BDO recently conducted, 80% of respondents indicated that they have already invested or are planning to invest in modern ERP technology. ERP system implementation stands to provide myriad benefits to these organizations, including process automation and workflow standardization, data analytics and benchmarking through dashboarding, enforcement of internal controls and flexible management, and regulatory reporting capabilities. However, for INGOs, realizing these benefits can come at a significantly higher level of effort and cost compared to other industries and nonprofit sectors. Difficulties often emerge with the integration of headquarter and country office operations under a single, holistic ERP solution.
Although implementation of a modern ERP system provides organizations with long-term return on investment through cost and resource savings, INGOs face unique challenges in the deployment of ERP solutions across country offices. The nature of INGO missions generally results in decentralized organizational structures and siloed operations, with each country managing its own procedures and maintaining its own statutory reporting requirements. Challenges arise when organizations require streamlined business processes between headquarters, regional and country offices that help the organization operationalize its mission and goals. Examples of these challenges, according to BDO’s latest INGO CFO survey and roundtable discussions, include the need for organizations to:
- Implement organization-wide process controls to mitigate risks
- Maintain a comprehensive source of employee information for domestic and international offices
- Roll up country office transactions for donor- or funder-specific reporting requirements
- Comply with localization and statutory reporting requirements
- Have real-time access to organization financial data and the ability to easily create dynamic reports with that data
- Mitigate risks for regional and field finance teams that lack adequate human capital
- Fill in gaps when there is a lack of reliable IT infrastructure to provide adequate bandwidth for modern day enterprise-wide tools to function properly
- Adapt to turnover of leadership and staff personnel
- Calculate accurate indirect cost rates to recover maximum reimbursable funds
- Automate reconciliation processes during month, quarter or year-end close
- Track organization-wide commitments and encumbrances
To address the ERP challenges above, INGOs have primarily two options to successfully dismantle the financial and operational silos between headquarters, regional and field offices:
- Implement one universal ERP solution: a holistic, global solution that can handle country, regional and headquarters offices within a single system; or
- Implement a two-tier ERP solution: a core ERP system at the headquarters that fully integrates with a second distinct ERP system utilized only at the regional or country offices.
There is not a one-size-fits-all ERP solution and implementation approach for complex organizations such as INGOs. The correct choice between the above options is dependent on each individual organization’s business model. However, it is ultimately more beneficial to maintain a single source of truth for financial data either through a single ERP system or a fully integrated two-tier ERP model. Aside from evaluating the performance of a core ERP system to meet organizations’ needs, other factors that INGOs should take into consideration when exploring ERP solutions include but are not limited to:
- Integration ability with supplemental tools
- Ease of use and user interface
- Simplicity and flexibility in the system design
- Footprint and customer satisfaction in the INGO market and similar organizations
- Low bandwidth capability
- Modular design to enable scalability
- License and implementation costs
- Simplified application architecture
- Business process design and definition
- Organizational change management
- Flexibility of reporting and analytics capabilities
The right collaborator can help INGOs navigate ever-changing ERP system needs and help organizations develop their global enterprise applications strategy, assess the current state of processes and controls, gather and develop future state requirements, identify gaps, evaluate various available solutions and implementation partners, and recommend a holistic global solution that best fits organization-specific needs.
Written by Andrea Espinola Wilson, Kasra Mojtahedi and CJ Myers. © 2023 BDO USA, LLP. All rights reserved. www.bdo.com