Tag: Accounting Standards

Non-profit Accounting Success Step 4

Resources and Skills Properly Leveraged to Economies of Scale

As previously mentioned in our blog, many smaller nonprofits don’t have access to a CFO or Controller. Furthermore, the requirements for someone with that level of talent might only demand 5-10 hours per month. Some nonprofits end up spreading these functions throughout the organization to either under or over qualified personnel, forcing the back-office to no longer leverage the appropriate economies of scale.

In order to justify having a full time Controller and CFO the nonprofit must be much larger. By partnering with an accounting firm to perform these functions your organization will be better positioned to access only the CFO and Controller-type skill sets you need, tailor fit specifically to your specialized needs. The third-party accounting firm can scale these functions across their business, passing on the value directly to the nonprofit.

Does your accounting need to be handled faster, cheaper and by a qualified person? Maybe it’s time to consider Beck & Company CPA’s. Contact us today for a free consultation.

Non-profit Accounting Success Step 3

When is Third-Party Accounting a Smart Move for Nonprofits?

As nonprofit organizations struggle to raise funds and are forced to operate on leaner budgets, some have found that engaging with an accounting service provide to complete certain back-office functions is a good way to keep costs down while maintaining support of their cause and/or community. Working with a service provider is not a new concept. For many years, both nonprofit and for-profit organizations have transferred projects such as accounting, finance and bookkeeping to third-party firms. Yet, a more recent trend has seen an increase in organizations partnering with third-parties to complete accounting processes. What used to be viewed as a strictly internal management function is now routinely performed by a outside CFO and accounting firm.

Working with a contracted CFO or accounting firm is much more than a preference for having someone else perform your detailed, routine tasks. It’s much more than saving money and cutting operating costs. It’s a strategic opportunity to save on overhead while increasing the amount you can spend on those you serve – something every nonprofit would find beneficial. According to analysts, nearly $4 billion will be spent on finance and accounting outsourcing this year as services spending reverts to pre-recession levels.

So, when should a nonprofit engage with an outside accounting partner? When accounting needs to be done better by qualified personnel, faster, and cheaper than the in-house staff resources can do it. Simply stated, it is vital for nonprofit organizations to have their accounting transactions processed correctly, quickly and within certain time constraints, all the time. Having an outsourced team dedicated solely to your accounting functions, rather than in-house staff that may have several duties competing for priority, increases the likelihood that your accounting will be done undistracted, and by people who are qualified to complete the transaction efficiently.

Business Tax-Time Problems Grow from Past Mistakes

Some of the biggest problems small business owners have during income tax filing season are the result of mistakes and oversights they made during the previous year.

Sloppy record-keeping, even when accounting software is used, is a big reason why owners struggle at tax time. Another problem is that owners often short-change themselves by not being sure they’re taking all the deductions they’re entitled to. That can also be the result of haphazard records, but it also may come from not knowing some tax law basics.

USE SOFTWARE TO HELP, NOT HURT

Many owners use software that’s designed to help small businesses keep their books easily. They run into problems when they don’t input their income and expense figures properly. Some businesses have not taken the time to really learn how to use a record-keeping program. They hand us a disk or thumb drive, and they’ve handed us a mess. It’s the high-tech equivalent of what accountants ruefully call shoebox or shopping bag clients, ones who show up with a chaotic pile of receipts that a CPA has to then sort through. When an accountant gets a disorganized disk or drive, it has to be straightened out before a return can be completed. The solution is to become more of an expert at using the software, or outsource accounting functions to input your numbers.

PAY ATTENTION TO WHAT YOU’RE PAYING

A common problem for business owners who use vehicles or homes for both business and personal reasons is they forget to keep track of what they spend for each. For example, an owner who gasses up his car may forget to reimburse himself for the portion of the purchase that should go toward personal use. The reverse can happen: An owner doesn’t think to take a tax deduction for the portion that should go toward the business.

Owners who use their cars partly for the business, or who have a home office, should go over all the expenses from the previous year and be sure that they don’t miss any chances for deductions. With a vehicle, insurance, gas, repairs and garage rental can all be deductible. An owner needs to determine the percentage that the vehicle was used for business and then multiply that by the expenses.

For example, if the car was used 60 percent for business, then 60 percent of deductible expenses can be listed on a tax return. It’s also possible to use the IRS’ mileage allowance to figure a deduction. With a house or apartment, there are similar rules for computing a deduction. In this case, square footage is used. Repairs, mortgage interest or rent, insurance, utilities and maintenance costs can all be deducted.

For more information, an owner should look at IRS Publication 587, Business Use of Your Home, or Publication 463, Travel, Entertainment, Gift and Car Expenses. You can find them on the IRS website, www.irs.gov.

PAY NOW OR PAY MORE LATER

If business owners are concerned about spending money during the recession, have shied away from consulting an accountant during the course of the year. Then, at tax time, their unanswered questions turn into problems. For example, if an owner didn’t ask a CPA for help in making decisions on big equipment purchases, the business could lose out on deductions designed to help small companies. The cost of a few hours with an accountant may be small in comparison to the amount the business ends up paying the government in taxes.

The solution is to get to an accountant or outsource accounting functions early, and get the books in order by a qualified professional.

The 1099 Repeal Amendment is Passed in Senate

The Senate approved an amendment on Wednesday, February 2 to repeal the expanded 1099 information reporting requirements in the health care reform law.

Two similar, but competing amendments were also introduced by Democratic and Republican lawmakers to be attached to a larger re-authorization bill for the Federal Aviation Administration. To view details about these amendments 1099 Repeal Amendments Proposed for Aviation Administration.

The two amendments mainly differed in a few words regarding the handling of administrative expenses at the Social Security Administration. To avoid adding to the budget deficit, the new amendment authorizes the director of the Office of Management and Budget to cut unnecessary unobligated spending, but exempts the Social Security Administration’s administrative expenses from being cut. There are also differences in the cost estimates of the two amendments and in how they would be offset.

The repeal of the 1099 reporting requirements enjoyed passed with an 81-to17 vote. The requirements, which were included in the Patient Protection and Affordable Care Act, would have required businesses to report to the Internal Revenue Service any purchases of goods and services over $600 a year from another business or individual. Eliminating these paperwork requirements lets small businesses focus on the critical work of growing their businesses and creating jobs.

Changes Ahead for Accounting Standards

By the end of this year the Securities and Exchange Commission will decide whether to set a firm date by which U.S. companies must convert to IFRS. International Financial Reporting Standards (IFRS) were developed by the IASB as a principles based standard that enable international companies to speak the same financial language, by providing for clear and comparable financial statement preparation and disclosure the world over. 

Currently, more than 100 countries are permitting or requiring the new standards, and the U.S. will soon follow. Whether we implement IFRS in place of the GASB standards we are currently using, or combine the two for a new version altogether, it’s imperative that business owners and CEO’s start learning and planning for the change. Even those who consider themselves ‘small-to-midsized’ should take note. The IASB recognizes that around 95% of the world’s enterprises fall in this category and have therefore created a scaled-down, more targeted version of IFRS them.

It is a great time to start researching how the new standards will impact your organization, and planning for how you can implement them in the near future.