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5 Finance Tips from Small Business Owners Just Like You

Are you a small business owner? If so, you are more than likely familiar with the stress related to running a small business. You are required not only to be available to answer questions pertaining to the day-to-day activities of the business, but you are also required to keep an eye on your business’ finances and plan for the future. It’s a hard job, but somebody’s got to do it…right?

While we cannot assist with the day-to-day tasks or make the hard decisions for you, we can offer some tips designed to help improve your finances. Our Washington DC CPAs and business advisors meet with business owners like you every day to provide financial services to their companies, and we receive a countless number of tips from our time meeting with them. Keep the following finance tips in mind as you continue on in your business ventures:

Always keep your finances in order. This may seem like a no-brainer, but you’d be surprised at the state of some companies’ finances. Make sure that you are maintaining your finances effectively and have someone who is keeping an eye on the financial status of your company. Hiring a CPA or accountant to perform crucial financial services would be a smart move if you do not have one on staff. Remember that potential investors will want to take a look at your company’s finances, so don’t let this area slide. Maintaining your finances now could make you more attractive to investors, not to mention that it will set up business up for future success.
Minimize financial risk. Minimizing risk is essential in financial management. Make sure that your most important and valuable business items are well-insured, and evaluate all financial decisions prior to making them. Make sure that your financial records are well-maintained so you have the knowledge you need to make all financial decisions.
Maintain separate personal and business financial accounts. Maintaining boundaries where money is involved is always a good idea. Consider separating your personal and business bank accounts. This will not only be helpful when it comes tax-time, but it will also be useful in maintaining your company’s finances.
Record all of your transactions. This is bookkeeping 101. If you haven’t been recording all of your transactions from Day 1, it is time to start now. It is crucial to be meticulous about your financial and business records so you can answer any and all questions about your company’s finances. Maintaining good records will help you with taxes, running your business, and investing in other business ventures. Make sure you write down (or input into your accounting system) everything. Don’t leave any financial questions unanswered and don’t set yourself up for an audit by maintaining poor records.
Remember to file your taxes quarterly. Self-employed business owners have different tax obligations. Rather than filing once a year, small business owners are required to file their federal and state taxes quarterly. Don’t make the costly mistake of filing only once a year. Figure out what you owe every quarter, and remember to put the money aside prior to its due date. Consider your tax bill as simply another bill you have to pay and – if it helps – invoice yourself regularly so you remember to put the money aside.

Stay tuned to our blog for more important small business tips from business owners just like you. If you are looking for financial services for your small business or simply need an accountant to come alongside you, contact us today. We offer many financial services to businesses just like you and would be more than happy to answer any financial questions you have regarding your business.

Using the Financial Statement for Effective Financial Reporting

Whether you run a nonprofit organization or are in charge of running a small business, effective financial reporting is crucial to the success of your business or organization. While there are many components necessary to creating effective financial reports, the financial statement plays an important role. Financial statements are used to show the true status of your company or organization’s financial standing and are usually run on a monthly basis. Monitoring the financial health of your company periodically can mark the difference between your company’s success and failure. We recommend reviewing your financial statements once a month in order to gain a good picture of your true financial standing and to adjust your financial planning for the remainder of the year.

What is a Financial Statement?
A company’s financial statement, in simple terms, is composed of three primary financial statements: the balance sheet, the income statement, and the cash flow statement. Each statement provides valuable insight into your company’s financial health. The balance sheet, for instance, is a summary of all your financial balances as a company or organization. It is often described as the “snapshot” of your company at a particular point in time. The balance sheet includes a summary of three parts: the company’s assets, liabilities, and the owner’s equity. The assets include everything pertaining to the business’ value (everything that is owned or owed), liabilities include everything that the business itself owes, and the owner’s equity is the owner’s share of the business (calculated by subtracting the company’s liabilities from its assets).

The income statement, more commonly known in the business world as the Profit and Loss statement, summarizes the profitability of a business (or lack thereof) at a single point in time. Companies can measure the profitability from any given time, such as from Quarter 1 to Quarter 2 or from August 1^st to February 1^st. The cash flow statement simply converts the company’s finances from an accrual basis to a cash basis and measures the flow of cash that has gone – and is going – out of the business.

How Can the Financial Statement Lead to Effective Financial Reporting?
Seeing the true financial status of your company can help improve your decision-making skills and clarify any questions you may have. Financial statements summarize business trends, measure the rates at which you are collecting receivables and paying creditors, summarize cash flow problems, help you determine which customers are in good standing, and highlight customers who are in need of collection efforts (or who have uncollectible open invoices). They also help you create more effective financial reports which – in turn – help guide your business to success.

Financial statements generally include a summary of your company’s accounts payables report, letting you know much you owe to other companies and when it is due. You can also run financial reports showing your current inventory levels and the value of that inventory. The purpose of the financial statement is to answer any questions you have regarding what you owe, what you own, and how much your company is making. These questions need to be answered in order to make strategic decisions on how to run your company more effectively in the future.

All statements and reports included in the financial statement are valuable to the financial process and should be treated as such. Reviewing these statements on a regular basis can increase your chances for success and provide you with an accurate view of your company’s financial standing at any given point in time.

If you need help making strategic financial decisions for your company (or would like us to walk you through the value of a balance sheet), contact us today. If you run a nonprofit organization and would like to learn more about effective financial reporting, stay tuned to our blog.

What Makes a Good CPA or Accountant?

A good CPA or accountant is hard to find. When it comes to entrusting your business’ important financial information to someone else, you ought to have high expectations. After all, the CPA or accountant you choose to manage your business will have access to all of your financial records and will provide you with insight into your financial decisions. This person should be chosen carefully.

While many business owners attempt to “handle it all themselves”, the reality is most business owners cannot manage their businesses successfully and handle the financial side of things at the same time. As a result, they look to outside help (usually in the form of a CPA or accountant). While we cannot pick your CPA for you, we can offer you some insightful tips to help guide you to the right CPA for your business or organization. We believe the following traits characterize a good CPA or accountant:

They must have a basic understanding of your industry.
This one should be a given. Your CPA or accountant needs to be familiar with your business’ industry in order to give you the advice you need and manage your accounts properly. While they do not need to be an expert, they do need to have a clear understanding of what sets your industry apart (particularly in the area of accounting). It’s possible to work with an accountant who is unfamiliar with your industry; however, it will be easier on both you and them if you choose an accountant who knows a little about your particular industry. Each industry has different terms and insider information that can only be learned on the job, so be sure to look for someone who knows the terminology.
They must be attentive to details.
An accountant or CPA needs to be detail-oriented in order to properly manage your finances. They must be aware of every tiny detail and change that occurs within your organization. You won’t have time to update your accountant on every single financial detail; that is something he or she will have to do for themselves. Make sure that the accountant you choose can take charge of your business’ finances and take care of the little things when it comes to your basic financial situation.
Good communication skills are a necessity.
You will be communicating with your CPA frequently, so make sure that you feel comfortable with your CPA or accountant. If he or she does not understand something, they have to be willing to ask for clarification or help. Communication is absolutely essential to the success of your accountant-business relationship, so make sure that your CPA possesses the skills they need to communicate effectively.
They need to know how to work a computer.
In this day and age, this may seem like a ridiculous request; however, there are many accountants and CPAs out there who have limited knowledge when it comes to computers and various software programs. In order to get quality reports, you need to have a computerized accounting system in place. Make sure that your CPA or accountant is familiar with the system and knows the basic workings of Word, Excel, email and the Internet.
They must always be striving to learn something new.
The accounting field is always changing. New regulations are passed, new laws are instated, and new industries emerge. Your accountant or CPA should be committed to learning more about the laws and regulations of the field. Some CPAs will acquire new skills through attending classes, while others will join groups to help them learn new tips and tools. Whatever they choose, make sure that they are committed to furthering their knowledge about accounting and preparing your business for success.
They need to understand the big picture.
A good accountant or CPA will not focus only on the accounting; they will take a look at the business as a whole and offer suggestions for improvement. A good accountant understands that the financial aspect of the business is simply one part of a whole, and he or she understands that one financial error can affect the entire business.Before hiring an accountant or CPA, give them an overview of your business and what you do. In order to accomplish the work you need, your accountant will need to understand the work you do. By providing them with an overview of your business, you are helping your accountant keep the big picture in mind as they focus on the little things.
They must be willing to follow through.
You want someone who will be reliable and who will finish projects through to completion. As you are interviewing accountants and CPAs, check their references and current clients. Are they happy with the accountant’s work? Does the CPA follow through on all of their projects? How does he or she respond in the case of a project delay? Find out how reliable they are before you hire them, or you could be faced with many incomplete (or late) projects.
They must understand how to do proper job costing.
Your accountant or CPA must understand how to do job costing properly. This includes tracking all costs by item and job detail. This will help you gain a better understanding of how much your projects are costing you, so you must depend upon their information to be accurate.
They must be willing to commit to your business.
This is the most important trait in a good accountant or CPA. He or she must be able to fully commit to your business. Without his or her full commitment, you might as well be doing the job yourself. You want someone who is committed to your vision and will make your business a priority. Don’t be squeezed into their schedule. If you are considering hiring an accountant who cannot meet the commitment level you desire, look elsewhere. You need to be sure that your accountant is doing everything possible to ensure the success of your business.

As you can see, there are certain characteristics that make up a good CPA or accountant. If you have any traits to add to the list, please leave your comments below. If you are looking for a CPA or accountant to take care of your business, contact us today. Our Beck and Company CPAs provide many services to help your business achieve the success you desire.

For a look at how a Beck and Company CPA can help your business, read our CPA client stories. Discover more tips for choosing the right CPA or accountant.

How to Prepare for a Nonprofit Financial Audit in Five Easy Steps

Nonprofit financial audits are unfortunately a common occurrence. Because nonprofit organizations rely solely on donated funds from the government and private donors, they are more susceptible to financial audits than businesses in the for-profit sector. In addition to ensuring that your organization complies with the various nonprofit financial reporting requirements, nonprofit financial audits can be used as an accountability tool and best practice for nonprofit success.

A nonprofit financial audit – though unwelcome – can highlight your organization’s weaknesses so you can focus on areas to improve over the next year. Keep the following tips in mind as you prepare for your upcoming audit. While it may seem unappealing and stressful now, your nonprofit financial audit can provide significant value to your organization. With the right amount of preparation, you can successfully survive and conquer any nonprofit financial audit thrown your way.

Choose your auditor carefully.
Just as you would choose any financial service provider, choosing the right auditor is crucial to making the audit process less painful. You need to select a nonprofit financial auditor that you and your team feel comfortable with. Make sure that your auditor understands your organization and can provide valuable recommendations and insight. If they are not familiar with your organization or industry, look for somebody else. Remember that choosing an auditor is essentially choosing a partner for your organization, so choose wisely!
Prepare ahead of time.
Your auditor will send you a list of items to prepare prior to his or her team’s arrival. Make sure that you have all of the items on the list and are fully prepared when the auditors arrive. Preparing these documents ahead of time will allow you to relax and focus on the actual audit, rather than scrambling around trying to find certain documents or information.You should also be prepared for the auditor of your nonprofit financial audit to request additional reports and information based off of the documents you supply. Make a note of any of the items requested during the audit so you can have them prepared in advance for the next nonprofit financial audit. Maintaining your reports and documents throughout the year can also help you come audit time.
Set clear deadlines – and follow them!
Be sure to communicate any deadlines to your audit team early on in the process. These deadlines could include bank submission deadlines, audit committee deadlines, board deadlines, or grant deadlines. If you begin the nonprofit financial audit process communicating clearly, you will be less likely to experience surprises or delays further on in the process.
Set a timeframe for completion.
Your nonprofit financial audit should be completed onsite as much as possible. Talk to your auditor and agree on a set completion goal before you even begin the process. If there are outstanding items after your auditor leaves, agree upon a deadline for open items before they leave your office. The more you know what to expect, the less you will stress over the unknowns.
Incorporate the auditor’s suggestions into your organizational plan.
Nonprofit financial audits are invaluable to nonprofit organizations. At the end of an audit, you should receive a management comment letter. In this letter, your auditor will highlight any areas of deficiency and concern, as well as provide suggestions for improvement. Don’t let your audit (and audit stress) go to waste. Implement the auditor’s suggestions wherever they are appropriate. This will not only improve your organization, but it will also prepare you for future audits.

If you are looking for an accounting firm who specializes in nonprofit financial audits, contact us today. In addition to our accounting services, we also provide nonprofit financial auditing services. Give us a call at (703) 834-0776 extension 8001 to learn more about our auditing and accounting services.

Storing Your Data in the Cloud

Many businesses are feeling the burden of keeping that information safe and secure. All businesses are data mines full of important company information. Without the proper security measures in place, that data is at risk. Two months ago, we discussed the importance of developing a disaster recovery and business continuity plan in the case of a natural disaster or cyber-attack. In that article, we mentioned how important it is to have a data backup plan in place in the case of such disasters.

While some companies prefer to store their data in a concrete location (such as a warehouse or alternate physical location), many businesses are turning to new technology, such as Cloud technology, to back up their important data and information. It is your job to protect your company’s financial information and ensure that their electronic information is never lost or destroyed. You can manage the risk properly by taking the necessary precautions in safeguarding your and your important data. Keep the following information in mind as you begin planning your data backup strategy:

Local backups (such as storing your data on a hardware drive, CD or thumb drive) can protect you from losing data due to hardware failures, viruses, software bugs, corrupt files, or accidental deletion. In order to get the most out of this method, you will need to back up your data at least once a week (some companies opt to back up their data daily). Many software systems (such as Windows 7 and Windows 8) also have built-in system backups to help make your data recovery easier. All you have to do is install it.
Offsite data storage is another method companies can use to protect their customer data. Some companies feel that offsite storage offers them more protection from natural disasters, employee sabotage, power surges, or equipment theft. Offsite backup locations, however, do require more planning and resources. Companies who choose this route will need numerous portable media (such as hard drives, CDs or DVDs), a secure offsite location in which to store media, and an organizational plan to regularly back up the data and deliver the media to the offsite location.
Cloud backup services are becoming more popular with businesses around the world. They are not only a cost-effective option, but they give businesses the flexibility they need when it comes to data backup. Storing your important client information and data in the Cloud not only protects it from many kinds of disasters, but it also requires no additional hardware, software, or media. Digital content is automatically transferred offsite to the Cloud, ensuring that your data is fully protected from all physical, digital, and environmental threats. This will allow your accounting firm to recover more quickly from any kind of disaster and give your clients peace of mind knowing their information is safe in your hands.

Is the Cloud Safe?

While it looks like a good solution on paper, many businesses question whether the Cloud really is a safe solution in which to store their business-critical data. Like many new technologies, the Cloud has come under serious scrutiny. How can a data backup solution that is maintained online be safe?

First of all, the Cloud has strong data encryption to prevent hackers (and even your backup service provider) from unlocking your data and violating your client confidentiality. The encryption technology is so advanced, in fact, that it offers complete confidentiality of all of your data stored in the Cloud. Make sure that your data is encrypted prior to (and during) transmission and that it remains encrypted while it is stored in the Cloud for safekeeping.

Your online data archive will also be fully protected with a digital encryption key. In order to keep your data locked up tight, make sure your provider allows you (or a designated person in your office) to be the only one with access to the encryption key. Research Cloud backup service providers thoroughly before choosing a provider for your accounting firm. Read reviews, ask other firms about their backup methods, and gain a full understanding of the provider’s services prior to coming to an agreement.

While no data backup plan is perfect, Cloud storage is cost-effective, flexible, and key to strengthening your company’s data security. The perfect disaster recovery and business continuity plan can make or break your accountant stress levels. Give yourself (and your customers) the peace of mind in knowing that your important data is stored in a secure location.

Avoid Devastating Mistakes in Your Nonprofit Startup – Follow These 7 Tips for a Smooth Beginning

Starting a nonprofit organization can be an exciting time. As you gather support for your new nonprofit startup in your community, you’re probably imagining all the ways your nonprofit organization will impact the surrounding community for years to come. Your dream of building a nonprofit organization from the ground up and finally coming true, and you couldn’t be more excited to begin the journey.

Over the years, we’ve seen too many nonprofits fail due to lack of planning and/or insufficient tools. These devastating mistakes can cause many nonprofit organizations to fail before they even begin. With so many governmental and private donor regulations, it can be difficult to navigate the many requirements expected of nonprofit organizations in addition to the complicated steps required of setting up a nonprofit. We’ve advised nonprofit startups for several years and have witnessed firsthand the many challenges involved in starting a nonprofit organization from the ground up. In response, we have developed 7 crucial steps to help nonprofits achieve a smooth startup.

Make sure there is a need for your organization in your area
Ultimately, your nonprofit organization is a business. In order for your nonprofit to be successful, there needs to be a demand for the services and programs your organization will offer. Research the community you are planning your startup and see if there is a need for your organization. Is there another organization in the area that offers similar services and programs? If so, is there a way to team up with the existing organization? Research the area and your options before you set up your organization. If there is an existing organization already offering the same services to the community, there may not be a need for your organization.
Create a “Business Plan”
As we said before, a nonprofit organization is essentially a business. While there are stark differences in the way nonprofits and businesses are run, there are many similarities. Like a business, your organization needs to have a healthy cash flow in order to survive (meaning there needs to be more money – or “funds” – coming into the organization than going out of the organization).Your business plan does not have to be complicated, and you can always change it as your nonprofit grows and progresses. A business plan is a like a roadmap; it brings focus to your goals for the organization and details plans you have for future growth. For more information about what your business plan should include, click here (link to July Article # 1).
Make sure your organizations qualifies for nonprofit status
While your idea for a nonprofit organization may seem substantial, are you sure it qualifies as a charitable cause? There are many types of nonprofit organizations, and it is crucial to know what kind of organization you will operate as. Research the types of nonprofit organizations and determine which type of organization you will be running. If you need help determining your status, contact your CPA. They will be able to help guide you through the nonprofit qualification process and answer any questions you have about achieving nonprofit status for your organization.
Meet all legal requirements
Many nonprofit owners are shocked at the number of legal requirements organizations are faced with. Nonprofit organizations are heavily regulated on a government, state and private funder level. Research all of the requirements you will have to meet, and enlist the help of your CPA or accountant. They can help you navigate the seemingly endless list of legal requirements and set you up for success.
Maintain accurate records
Keeping good records (financial, organizational, etc.) is key to the success of your organization. As we mentioned above, nonprofits are subject to many legal requirements, and accurate records will alleviate the stress related to meeting those requirements. Many funders have special reporting expectations, and a good set of records will help your organization effectively meet those expectations. If you maintain good records from the beginning, you will be less likely to run into problems in the future.
Create a fundraising plan for your organization
Fundraising is crucial to your nonprofit’s success. Without funds, you will not be able to provide the services and programs your community needs. It is important to have a strategic plan in place when it comes to fundraising for your organization. Brainstorm how you wish to obtain the majority of your funds. Do you want to apply for government grants? Would you rather receive funds from private donors? Determine what is best for your organization, and develop a plan. Without proper planning, your fundraising efforts will most likely fail.
Choose your board members wisely
Your board is crucial to the success of your nonprofit organization. The board is legally responsible for keeping your nonprofit on track with its mission, providing you with the expertise you need, and helping you raise the necessary funds to keep your organization running effectively. Make sure you choose the right people with the right expertise to serve on your board. The wrong board members can cause serious – and potentially costly – issues in the long run.

As you can see, starting a nonprofit organization involves more than simply providing a few cool programs and services in the community. It is a business venture and requires proper planning to be successful. If you have any questions regarding your nonprofit startup, contact us today. We’d be more than happy to help guide you through the legal and financial requirements involved in starting your organization and prevent these devastating mistakes from occurring.

Creating a Business Plan for Your Nonprofit Organization

As we’ve discussed in the past, nonprofit organizations are not much different than their for-profit counterparts. In fact, we can learn a lot about running a nonprofit organization simply by researching how businesses and corporations perform certain functions. In addition to ensuring the proper bookkeeping and accounting tasks are being done, business owners create and maintain a business plan. This plan serves as a roadmap for the entire organization. It brings focus to your business goals, details your business plans extensively, and provides the necessary information required for the successful running of a business.

Nonprofit organizations can benefit greatly from implementing a business plan. Detailing the organization’s goals, strategies, and financial situation, a business plan can be revised and changed throughout the organization’s lifecycle. Keep the following structure in mind as you develop a solid business plan for your nonprofit organization:

An Executive Summary that describes your nonprofit’s mission and vision, services, programs, marketing plans, and funding options.
The Organizational Structure section should detail how your nonprofit will be structured. List all board members and staff positions necessary to run your organization effectively. Describe your objectives, growth plan, and any trends relevant to your organization’s industry in this section.
The Products, Programs and Services section should list and describe all of the products and services your organization plans on offering. Provide as much detail as possible (including delivery methods, the benefits of provided programs and services, and future development plans).
The Marketing Plan section should describe your organization’s unique approach to marketing. Ask yourself these questions: Who will your nonprofit be serving? How will you reach your targeted client? Explain your plans for getting your programs and services out in the community, and provide examples of marketing collateral in the appendix of your business plan.
Your Operational Plan should describe how you plan to run your nonprofit organization. This is where you will detail where your nonprofit will be located, what kind of equipment/inventory/etc. will be needed to provide the services, how you plan on maintaining your organization, how you plan on delivering services, and how you plan on measuring the effectiveness of those programs and services.
The Team and Staff section should provide information about key organizational staff, including board members, nonprofit managers, and general team members. List important information (such as a bio and a list of their expertise) along with each staff member profile. Include an organizational chart, explain responsibility, and provide an assessment of current and future staffing needs.
The Financial Structure section should detail your organization’s current financial situation and projected financial status. List any outstanding loans/debts, holdings, bonds, and endowments in this section, along with your financial plan for the organization. If you are currently accepting (or plan on accepting) any grants or donations, list the details within this section. All sources of income should be detailed in this section. You should also consider including an income statement, balance sheet, financial projections, and a cash flow statement in this section. Include your fundraising plan and any other information related to the financial success of your organization.
The Appendix should contain the resumes of key staff and board members, charts and graphs detailing important information, marketing materials, the organization’s strategic plan, and the annual report.

Imagine how much more organized your nonprofit can be by simply develop a comprehensive business plan. While this plan is ideally created at the beginning of an organization’s lifecycle, it can be created or updated at any point in the process. With a clear and concise business plan in place, your organization is more than likely to succeed.

If you are in need of any bookkeeping and accounting services, contact us today. While having a business plan in place for your nonprofit organization is important, you will also need to have your books and accounts in order to maintain a certain level of success. Our certified CPAs and accountants will come alongside you to help you develop the most beneficial business and financial plan for your organization.

Why It is Necessary for Small Businesses to Maintain Accurate Financial Records

Why do some small businesses fail in the first five years of business? While the slow economy can be to blame for some of the failed businesses, mismanaged finances is the largest culprit. Keeping an accurate record of your company’s finances is crucial to not only understanding your company’s financial demands, but also to staying in business for years to come. Accurately recorded books also provide small businesses with current, up-to-date financial information, giving them insight into the company’s current situation and enabling them to make informed financial decisions for the company’s future.

Why is Bookkeeping So Important to My Business?
First of all, if a company wishes to seek out potential buyers or funders in the future, it is important to maintain and uphold accurate financial records. When investors and lenders express interest in a company, they will want to examine clear and well-kept books in order to gain an accurate assessment of the business.

Proper bookkeeping, in addition to preventing costly audits, builds the business’ framework by outlining its strengths and weaknesses. Without proper bookkeeping, a company’s quarterly reviews would be useless. These reviews help business leaders make accurate, informed decisions for the future of the company based on the information gleaned from their important financial documents. Without accurate financial records, business leaders would not be able to make decisions on the company’s growth or identify any problem-areas needing immediate attention. Basically, if a company wishes to grow and succeed, it needs to have immediate access to important financial information.

Identity theft and other threats have also increased the importance of accurate bookkeeping. If a company has a well-maintained set of books, identity theft or a simple error will stick out like a sore thumb. If a company’s books are not properly maintained, it will be easier for identity theft and errors to slip under the cracks and cause extensive amounts of damage.

Maintaining good bookkeeping practices is not hard; it just requires a little time and attention. Find out how to clean up your records with these bookkeeping basics designed for small businesses.

Avoiding Financial Errors in a Nonprofit Audit

Financial management is not always high on the list of a nonprofit organization’s priorities; however, it must be done. In order to effectively carry out a program’s mission and desired impact, nonprofit organizations need to properly manage their finances and adhere to government and grant-funder requirements. This includes running periodic reports detailing how the organization is spending donated funds, balancing the budget, and detailing the organization’s fund allocation.

Because nonprofit leaders are not financial gurus, many nonprofit organizations risk having financial errors in a nonprofit audit. Protect your organization from financial risk by keeping the following 7 tips in mind:

Follow your organization’s general accounting policies and procedures
The first thing your nonprofit organization should have developed after its mission is the organization-wide accounting procedure. Every nonprofit should have a formal and documented accounting plan in place detailing all aspects pertaining to the organization’s finances. This plan should detail how the organization manages its finances (accepting donations, paying bills, allocating donated funds, depositing funds, etc.). This plan should be in writing and followed by the key financial leaders in the organization every time.
Maintain accurate data (and data entry)
Accurate data entry is crucial when trying to prevent costly errors during a nonprofit audit. One small mistake often leads to a huge mistake if gone unchecked, so make sure that you double-check entries each time they are entered into your accounting system and compare each entry to your bank statement every month.
Establish a budget
As we have already discussed, the nonprofit budget plays an important role in keeping a nonprofit’s financial health in top shape. Budgets serve as a baseline to prevent the overspending of funds. If your organization does not currently have a budget in place, start out by developing a basic budget that can be adjusted over time. A basic budget is better than no budget at all!
Allocate funds
All money that enters into the organization needs to be allocated properly. Does your organization receive grants for particular programs? Then make sure those funds are going to the corresponding programs. Every penny that goes in and out of the organization should be accounted for and allocated correctly. Every employee should understand the different accounts and how they should be used.
Hire a CPA or accountant that specializes in nonprofit accounting
Nonprofit organizations face many financial requirements and reporting obligations. Because nonprofit leaders are often too busy running the organization, nonprofits turn to outside help in the form of nonprofit CPAs (or nonprofit accountants). A nonprofit CPA will have the knowledge to guide nonprofit organizations through the financial management process and assist them with meeting their financial reporting requirements.
File!
Use a filing system and make it a priority to file all accounting paperwork at least once a week. This will ensure that your accounting files will be available and accessible any time you need them during your nonprofit audit.
Keep backups of important financial data
You should always have backups of your most important files and documents. If you do not store backups at an alternative location, consider starting now. In the case of a natural disaster or computer glitch, you will want your financial data to be safe and available. Consider storing all of your data backups in the Cloud or in a system off-site. You never know what will happen, and it’s best to be prepared for any catastrophic event rather than lose your organization’s mission-critical information.

The above tips were designed to assist you in coming out of a nonprofit audit error-free. If you’d like to learn more about preparing for your audit, click here.

Tips for Finding the Right CPA for Your Nonprofit Organization

Nonprofit organizations, as we discussed last week, need guidance when it comes to the financial aspect of the organization. Dedicated to running the programs and providing the support their communities need, nonprofits often lack the time and attention to successfully manage their finances. With the help of a trusted financial advisor or CPA, nonprofit organizations can gain a better grasp of their finances and ensure that they are adhering to all of their financial obligations in terms of grants and federal requirements.

As you begin your search for the perfect CPA for your nonprofit organization, keep the following tips in mind. While the search for the right CPA is not an easy process, the time and dedication you commit to finding the right person to handle your organization’s finances will pay off in the long-run.

How do I even begin finding a CPA for my nonprofit organization?

Inform your staff members and volunteers of your need for a CPA, and ask them if they have any referrals.
Mention your search for a CPA in your regular newsletter.
Call your state’s CPA society for referrals.
Search through your member or donor list for active CPAs. Give them a call and see if they are interested in helping your organization.
Ask surrounding nonprofits for their CPA’s contact information.
Join an online professional networking site. Once you’ve joined some groups, go online and post your need. You never know who may be willing to help!

Building a quality relationship with your nonprofit CPA is essential. Remember that a quality CPA will benefit your organization more than it costs. If your current CPA is costly your organization more time and money, you should looking elsewhere for your organization’s accounting services. Once you’ve found the right CPA for your nonprofit organization, make sure you discuss the estimation of fees and desired tasks in length. You don’t want to be surprised later on down the road with any unexpected costs.

It’s important that you feel comfortable enough with your CPA to ask any questions you may have about their experience, responsibilities, knowledge, etc. After all, he or she will be your trusted business advisor from now on, so don’t leave any questions unasked! Keep the following questions in mind as you begin talking to your chosen CPA about their involvement with your nonprofit organization:

How many nonprofit organizations does he or she currently work with? Does your CPA work with organizations of a similar size?
What is his or her area of specialty? Some CPAs only conduct audits while others specialize in preparing the IRS Form 990. Make sure you’ve chosen a CPA that matches your organization’s needs.
Ask who you will be working with. Larger CPA firms generally have several people handling their accounts, and the original person you interviewed with may not be the person working on your account. Find out who you will be working with so you know who to go to with any questions or concerns.
Ask your CPA to explain the financial reporting requirements specific to your nonprofit organization. This is really a test to see if the CPA you’ve chosen knows the guidelines. Do you understand his or her explanation, or are you lost in the professional jargon? Getting on the same page is crucial to the success of your CPA-nonprofit relationship.
Find out if they charge by the hour or by the project.

After your first audit, your CPA will be able to tell you a lot more about your organization. They can compare your nonprofit to other nonprofits they work with and give your organization suggestions for improvement. Remember that your relationship with your CPA is an on-going relationship that will benefit your organization for the long-haul. Make sure you choose your CPA wisely!

Should your nonprofit organization hire a CPA? Discover why you should make the decision to move your financial management to a nonprofit CPA here.