Bookkeeping – Beck & Company

Are You Keeping Too Much Nonprofit Documentation?

4 Document Management Steps You Should Follow

Last week, we talked about the importance of document retention for nonprofit compliance, especially as it relates to donor gifts. This week, let’s take a look at the importance of purging documents and data. When your nonprofit organization is required to keep documents, it can be easy to just keep everything. Has your data storage grown exponentially over the past few years? Has your organization become a pack rat, hanging onto records and data you don’t really need? As electronic storage capacity has increased and gotten cheaper, it is much easier to hold on to information. While it may seem that the cost to store data is cheap, it can be more expensive than you think. These hidden costs are why having an Information Governance plan is so important.

The hidden costs of too much data

Information Governance encompasses document management as well as information security, compliance, business intelligence and big data. It attempts to find the balance point between extracting value from data and reducing the potential risk of data. While the cost of storage may be minimal, it can cost exponentially more if there is ever a reason to do e-discovery for legal or compliance reasons. When there is a legal action of some sort, auditors or regulators or the FBI can secure the data on an organization’s servers and workstations and sift through it all. A study by the RAND Corporation, Where the Money Goes, estimates that e-discovery costs average $18,000 per gigabyte.

4 ways to manage the risk

There are steps that you can take to minimize your risk.

If you don’t need it, delete it. Yes, this can take time, but every piece of unneeded information not only costs money to store, but it is a liability. Think of all of those emails in your inbox that also have attached documents.
Purge unnecessary email and information. You are liable for constituent and customer data. If a customer is subject to legal action that requires e-discovery, and you have received related customer data, your systems are open for discovery as well.
Classify information. You should classify all information that you are storing. For example, if an email string is discussing sensitive organizational data such as constituent personal information, that email should be clearly marked as confidential. This is legal protection.
Make document management policies and follow them. It can be easy to ignore the document archiving process—the task is complete and you move on. However, creating a document management strategy is important for your long-term success, efficiency and compliance.

One way to gain valuable wisdom in matters that impact your organization is to contact Beck & Company Certified Public Accountants and Business Advisors. We want to use our many years of professional expertise to help your organization succeed. Contact us today for more information about our nonprofit services. We can assist you in implementing policies that save you money and let you focus on your mission.

Are You Keeping the Right Nonprofit Documentation?

I admit that Post-it^® note sheets that adhere to virtually any surface are now my substitute of choice for retention. – Candice Bergen

While the humorous quote about Post-it^® notes from Candice Bergen probably brings a smile to your face at the thought of Post-it^® notes sufficing for record retention, the subject of which documents should be kept and for what length of time is one that is worthy of discussion for nonprofit organizations.

Donations Records

One area of note is donor gift documentation. It is a complex topic as shown by the several IRS publications that focus solely on this area. Nonprofit organizations that rely on donor gifts must be in compliance with the strict regulations regarding donations. The compliance rules and procedures allow the organizations to avoid penalties and retain their tax-exempt status.

The tricky part is that there are different regulations for the various donations. Donations can be in the form of money, vehicles, inventory, and investments, among other forms of gifts. For some organizations, there can be a basic type of donation that is usually received. However, when an organization continues to grow and gain more donors, the donations might take on a different look. An organization might normally receive monetary gifts, then one day a donor might show up with a vehicle donation, or there could be that donor who wants to donate a large tract of land.

These are real dilemmas for a nonprofit organization. It is wise to know not only what documentation you need to keep but also what documentation needs to go to the donor. Most donation documentation needs to be retained for ten years.

Who’s Who List

Nonprofit organizations also have special documentation requirements for detailing every relationship, whether that is

“disqualified” persons or those with conflict of interest—anyone who exercises control over the organization’s activities as well as member of that person’s family and owned entities,
related organizations or
donor advised funds—a distribution from a fund that results in excess benefits to specific people that can influence an excise tax on the recipient.

Other areas requiring retained documentation include:

Financial Records: Generally, financial records such as ledgers and schedules, bank statements and checks should be retained for ten years.
Conflict of Interest Policies: While the IRS does not require a written conflict of interest policy, they strongly recommend one.
Compensation Reviews: It is important to maintain documentation on compensation for all trustees, directors and employees. You need to have proof of proper compensation levels.
Public Inspection and Distribution of Form 990 and 990 T: Each annual information return needs to be available for three years.
Written Disclosure: Records disclosures are required when a donor receives goods or services in exchange for a single payment exceeding $75.
Employee Personnel Records: Employee personnel records should be kept for seven years after termination.
Volunteer Records: Volunteer records should be retained for three years.

Please note that this is not a comprehensive list of documentation and their retention requirements. As always, consult IRS regulations that are currently in effect or work with a nonprofit consultant who can help you maintain compliance.

Having clear documentation polices are critical to maintaining regulatory compliance and ensuring your nonprofit’s reputation. Lack of proper documentation can result in fines and penalties, temporarily restricted endowment funds and even removal of your nonprofit status. Don’t take that chance; stay up to date on documentation rules and implement practices that comply with them.

When you need professional expertise, contact Beck & Company. We have spent years learning the rules and regulations for nonprofit organizations and we work hard to stay apprised of all changes. We want to use our professional expertise to not only make your organization run more smoothly but also to help you succeed. Contact us today for a consultation.

5 Small Business Bookkeeping Tips to Keep Your Records on Track

Today’s small businesses face unique challenges compared to their big business counterparts. Due to smaller staffs and limited financial resources, many small businesses struggle to maintain the day-to-day tasks associated with basic bookkeeping and financial management. With a little effort and education, however, small businesses can begin to excel at financial management and bring some organization back to their accounting books. In our work with small businesses in the Washington D.C. and Virginia area, we’ve uncovered the most common small business bookkeeping mistakes. The following tips are designed to help you fix these simple bookkeeping errors and get your accounting back on track:

Maintain daily accounting records to improve accounting accuracy. Accounting shouldn’t be a once-a-week activity. To gain a true understanding of your business’ finances and to ensure financial reporting accuracy, you need to be maintaining daily records of your business’ finances. With the right accounting system in place, this doesn’t have to consume too much of your time. In fact, simply devoting 10 to 20 minutes a day to basic bookkeeping tasks can do wonders for your business.
Use the right accounting system for your business. No accounting software is perfect for every business; that’s why we suggest exploring your options and choosing the software that works best for you. Specialized small business accounting software, such as Sage MIP Fund Accounting or Blackbaud, can help you streamline your accounting processes; however, basic accounting systems such as Quickbooks can be equally effective. Take the time to determine your needs in an accounting solution and choose the most cost-effective solution to fit your needs.
Review bank statements on a monthly basis. Most banks provide bank statements with a month-end cutoff, making it easy to gain a complete month-to-month view of your business spending. Synchronizing your bank statement with other monthly records will make it easier to reconcile your statement and keep a close eye on business expenses.
Implement a detailed check handling policy. Checks should be handled with the same amount of care and attention to detail as cash. Don’t toss canceled checks in a drawer and forget about them – dispose of them correctly. Canceled checks are as good as cash, and if something goes wrong, your business, not the bank, is responsible. Make sure you review all canceled checks before anyone else in your business (including your accountant and employees) sees them. This will help you catch unauthorized checks and prevent fraud from occurring.When signing checks, be sure to sign them with a distinctive signature that would be difficult to forge. If you are a partnership, consider having at least one partner co-sign all of the checks for added protection and accountability.
Create an audit trail. Effective small business bookkeeping requires you to be able to quickly and easily retrace your business’ financial activities. Most current accounting systems have audit trail capabilities, but if your accounting software does not, you may want to consider investing in a solution that does. In addition to maintaining an audit trail in the accounting software itself, make sure all of your financial files are organized. Keeping your invoices and checks in numeric order and not skipping invoice or check numbers can help you keep track of your finances, as can maintaining separate bank accounts for business and personal use. Chances are, if you can’t go back a year or two and reconstruct your business’ finances, your audit trail is not effective.

Stay tuned to our blog for additional small business bookkeeping tips. If you could use some help organizing your accounting books, give us a call today. We offer a variety of small business accounting services to help you create clear and accurate financial records.

Bookkeeping and Accounting Tips for Business Owners

A business owner’s job is never ending. In addition to ensuring that the business is running smoothly and meeting customer expectations, business owners are also required to keep track of important data and information that is crucial to the business’ operation. Many business owners prefer to do the “bookkeeping” in their heads, a method that – while proven sufficient – is not highly recommended. As federal laws and regulations become more stringent, business owners are seeing a need to reevaluate their current processes and move their bookkeeping to a more reliable system.

If your business does not have a financial system and specific processes in place to account for your company’s financial situation, it’s time to invest in a new bookkeeping and accounting system and processes. This will help you gain a better handle over your company’s financial situation, help you better meet your business goals, and maybe even increase your profit.

We’ve created a few crucial bookkeeping and accounting tips to help business owners just like you prepare their company for financial success. Keep the following tips in mind as you reevaluate your company’s bookkeeping and accounting processes and procedures:

Track your expenses.
This may seem obvious, but you’d be surprised how many business owners skip this crucial step. Tracking your expenses is extremely important, otherwise you may miss crucial tax write-offs or put your business at risk during an audit. Many business owners track their expenses by using a single credit card for the business only. Once the credit card statements come in, they enter the information into the bookkeeping and accounting system to they can keep track of all their purchases throughout the year.Business owners should also write down business trips, lunch meetings, and other events that require a company pay-out or reimbursement in their day planner (or phone). This habit, while hard to establish at first, will ensure that you have all of the information you need for your tax records in the case of an audit.
Plan for any major expenses.
Take a look at your business goals for the next five years and plan out any potential expenses you see on the horizon. If your company is expecting to upgrade its computer software a year from now, go ahead and put it on the calendar (as well as in your budget). This will give you adequate time to prepare for the upgrade, both financially and operationally.
Record your deposits accurately.
Implement a system that is designed to keep your financial information straight. You can record your deposits in a variety of systems, such as Excel, Quickbooks, Peachtree, or Sage accounting software. Business owners make a variety of deposits into their bank accounts every month; therefore, it is crucial to keep meticulous records so you don’t accidently report on income you don’t actually have.
Put your tax money aside.
We cannot stress this point enough. Putting money aside for your taxes as you generate income is extremely important as you can be penalized for not filing and paying quarterly taxes on-time. By automatically setting aside money throughout the year, you will be more than prepared to pay your quarterly taxes on-time, every time.
Watch your invoices.
You cannot do it all. Assign someone within your company to track your billing process, for late or unpaid bills will only serve to damage your cash flow. Once you have set up someone to keep track of your company’s invoices, establish a process for follow-up. This can either be in the form of a second invoice, phone call, or letter stating that the client will be billed an additional fee if the invoice remains unpaid. Just because you’ve sent out the invoices does not mean the billing process is over; it has, in fact, just begun.

Stay tuned to our blog for more bookkeeping and accounting tips. If you are a business owner and would like some help developing new bookkeeping and accounting processes, give us a call today at (703) 834-0776. We would be more than happy to help you find the best way to keep track of your company’s finances.