non-profit accounting – Beck & Company

Accounting for Nonprofits: Close the Book on It!

Preparing Your Books for the End of Year Close

‘Tis the season – the season when nonprofits everywhere start thinking about year-end close. This year, vow that you’ll do all you can to smoothly and efficiently close the books with minimal stress to your accountant. Accountants everywhere thank you.

In all seriousness, there are many reasons why doing a good job preparing your books for the end of year close is important. Without closing your books for the year, you’ll have no idea if your nonprofit was profitable or not. Closing the books and reconciling them means that you’ve tallied up everything for the end of the year, put a period or end point on it, and start with a fresh slate in the new year.

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Closing the accounts for the year reset the revenue and expense lines to zero. These ‘temporary’ accounts are now ready for the new year, a clean slate, and a new eye to profitability. Without closing your books, you’ll have a muddle of data to assess, and you won’t get a clear picture on how well your organization achieves its financial goals during the year.

Accounting for Nonprofits: Tips for Success

There are certain steps you can take to successfully close your books for the end of the year. This includes:

Keep your accounts updated: Schedule time monthly to reconcile expenses and income. If you let it all pile up to the end of the year, it will feel overwhelming. There’s also more of a chance to make mistakes and forget items.
Create a checklist: A detailed and thorough checklist that details every step for your year-end close is a helpful resource. Such a process can guide you through the close out each year and save time.
Ask questions during the year: Hopefully, you have a great certified nonprofit accountants to work with, someone who knows your nonprofit and is open to questions. Don’t let questions delay your routine accounting practices. Ask questions throughout the year so that you don’t let mistakes proliferate.
Schedule plenty of time for your audit: Dovetail your end of year close with audit prep, but leave plenty of time for your audit. By doing both at the same time – audit prep and end of year close – you’ll be well-prepared for the new year.

Pay Bills, Lower Receivables

Another useful end of year task to tackle before reconciling and closing your books is to pay off any outstanding invoices so that you carry fewer into the new year. You should also review your accounts receivable file, and attempt to collect any past due invoices. You can certainly carry these over, but it is always a good idea to avoid open receivables. The fewer receivables you have, the more income your nonprofit has at the ready.

While closing out your books may not be top of mind as you celebrate the holidays, tackle the tasks early enough in the month so that you can get them done while people remain in the office. Note when your accounting team may be taking time off to travel or celebrate the holidays, and work around their schedules. You can complete your end of year close with plenty of time to enjoy the festivities of the season.

Beck & Company

Beck & Company provides nonprofit accounting and audit services in Washington, D.C and Virginia. Founded in 1987, we specialize in the world of nonprofit institutions, helping them to navigate the complex world of finance and accounting. Our services are always personalized, and cost-effective for your institution. We welcome your inquiry or call. Contact us today or call 703-834-0776 x 8001.

Keeping the Cash Flowing and Other Nonprofit Woes

Living hand-to-mouth, or living one step ahead of the bill collector, is something most college kids are chided about when they graduate and take their first job on the corporate ladder. Yet many nonprofits are living “hand to mouth” or waiting for the next fundraising event or donation campaign to make up for significant shortfalls in their cash flow.

If that just described your nonprofit, it’s time to take action. Just like newly-minted college graduates can only live on Ramen noodles and a weekly paycheck for so long, you’ve got to put aside a nest egg to carry your organization through the lean times.

No matter how good you’re doing now, lean times will come. They may come because of lowered donations or not winning a grant, or they may come simply because your constituents’ needs burgeon beyond what your current operating budget can sustain. That’s when having money set aside can be a lifesaver.

Five Tips for Corralling Your Cash Flow

If it’s time to corral your cash flow, these five tips can help you regain control and manage it more effectively against the proverbial rainy day.

Balance sheet management: A strong equity-to-debt ratio ensures that you’ve got enough cash on hand to safeguard your organization during lean times. If the ratio favors debt to equity, work on bringing it back into balance or slightly tipped to the equity side of the equation.
Avoid unnecessary debt: Debt, such as credit card debt or loans, can be used strategically to offset larger purchases. But don’t get into the habit of taking on large debts while waiting for more money to come in. That grant you’ve “always” gotten may not be awarded to you this year, or a charity fundraiser could be cancelled due to a snowstorm or hurricane. Smart use of debt may mean funding a large purchase with a loan or a no-interest credit card payment, for example, that lets you pay the principle off without interest or penalty.
Consider leasing major equipment: If your nonprofit regularly buys vehicles for its use, consider leasing them. The cost of the lease can be written off and you won’t have expensive payments to make to own something that depreciates in value. Other equipment such as office furniture, copiers and computers can also be leased.
Embrace the cloud: Cloud-based software can save an organization a great deal of money, which puts cash back into the cash flow. Cloud software uses rented or shared server space with other companies. You can renew licenses on a monthly or annual basis, and you don’t need to invest in costly upgrades or updates. The information saved to the cloud is also accessible for others in your organization via a web-based interface making it easier to share. It saves you money while enhancing productivity, two great strategies for improving cash flow.
Avoid taking on new projects until you’re sure you can afford them: That’s easier said than done for many nonprofits. The need is great, and the resources to serve that need may be small. But if you take on too many new projects too soon, without capital undergirding those projects, you could be headed for trouble. Instead, set aside money for specific capital campaigns such as building funds or new projects so that the money is earmarked for the intended purpose without taking it from the general cash flow.

Talk to your accountant or a business consultant such as Beck & Company about other strategies to improve your nonprofit’s cash flow. You can’t always rely on this week’s income to pay next week’s debts. Some weeks your donations will be up, some weeks they will be down. But with the right cash management strategy, you can be assured you’ll always have enough on hand to pay the most important bills first.

Beck & Company Certified Public Accountants and Business Advisors

At Beck & Company, we know that earning a margin means achieving your mission. Managing your money so that you can continue to do the work of your nonprofit is our primary concern. We work with nonprofits to help them with their accounting and business planning needs. Contact us today for more information, or call us at 703-834-0776.

Training Your Team for Fund Accounting Systems: Tips for Successful Implementation

It’s go-time, and your staff is excited about the new fund accounting systems you’ve put into place. But wait: before launching the new system, have you made plans for training everyone on how to use the new fund accounting system?

Training, it seems, is often an afterthought when it comes to new software launches. Managers, IT staff, and everyone involved with selecting, implementing and using the new software should be involved in the training. Here’s how you can learn from adult educators on the best ways of engaging users in your new fund accounting system.

#1: Sell the value.

Even before you invite the team to a training meeting, you need to ‘sell’ them the value of the new software. Unlike children, who learn out of curiosity or obedience to authority, adults learn best when they perceive the personal value of anything they are expected to learn.

The staff of your organization must know right from the start why you’ve chosen the new software and why this particular product from among many fund accounting systems. How will it help them with their daily work? Will it solve problems, increase productivity, work smarter or faster than what they’ve used before? It’s only by answering these questions upfront will you grab their attention for further training.

#2: Keep training sessions focused on what users need to know.

Users need to know precise information to help them do their jobs well. They don’t need to know the history of the product, or the bells and whistles that so excited your CEO. They want to know now how to use it to do their jobs better. Focus your training on immediate activities the group can do to use the new software.

#3: Use it or lose it.

Another truism with adult learners is that they must use their newfound knowledge immediately or else it is forgotten. Adults need to use new skills repeatedly in order to keep them fresh. Schedule training sessions with the new fund accounting system where users actually bring in their projects and work so that the training can focus on job-related skills, and users can ask questions while actually using the system for real work.

#4: Customize vendor trainings.

Vendor trainings can be a great asset, but you may need to customize a vendor training session to your organization’s needs. You know your team. They may respond best to written materials, hands-on demonstrations, or simple verbal instructions. Work with your software vendor to tailor training needs to your team.

#5: Schedule follow up.

Many training programs fail because trainers pour information out and then leave without follow-up. Users leave the session invigorated and excited, but stumble using the new system when they return to their workplace. To keep the momentum going after training, schedule follow-up meetings a week or two after the initial training. Invite users to bring questions to the meeting so that you can help them use the system to its fullest.

Ready for New Fund Accounting Systems?

At Beck & Company, we understand the unique needs of the nonprofit sector. Our CPAs and consultants have been assisting nonprofits since 1987 with their accounting and operational needs. If it’s time to implement a new fund accounting system, please contact us for assistance. Call 1-703-834-0776.

Increasing Accountability and Transparency through your Nonprofit Accounting Service

Trust is a precious commodity in the nonprofit sector—are you doing all you can to keep it?
Restrictions around the use of government grants continue to rise, and private foundations and corporations are asking organizations for specific measurable outcomes resulting from grant awards. Pressure is continually added by tightening federal regulations. There are talks of a possible requirement to add performance measures to the IRS Form 990, along with the chance of federal funding becoming subject to comply with OMB Circular A-133, thus requiring annual audits.

Compounded with stories of the misuse of funding grabbing headlines, the temperament of the donor community, although positive, is more cautious than in yester years. Not only is being accountable in aspects of your organization’s financial and program management an absolute necessity, but it is imperative now more than ever.

Accountability is not just the responsibility of the CFO or the Executive Director, but of all staff, your accounting services firm, board members who are involved in the financial management, fundraising, and program planning and implementation. Make sure money raised is being used for the purposes you outlined in your solicitations, and communicate it clearly and often to your donors. This can be as simple as sharing success stories in your donor newsletters or making your annual report available on your Web site, but also as complex as reporting on fulfi lling grant restrictions, program outcomes, matching requirements, and the impact or difference made by your organization. At the end of the day, however, tangible proof, such as clear tracking of donor restrictions and funds spent from the fi nance office, will underscore the organization’s accountability and transparency, and will help to build a case for continuing and future support.

Accountability also means keeping the lines of communication open with your supporters through the good and the bad. During an AFP Meet the Funders workshop, grant-makers and donors expressed the desire for communication—especially when plans go awry. “It’s not an opportunity to take the support away,” said one participant. “It is an opportunity to learn what roadblocks the program or project is facing, and figure out how we can work together to overcome it.”

It is no secret that donors and the grant-making community network and talk. Your actions and communications can reinforce their decision to give to your organization and may help them bring others to the table. On the other hand, your actions and communications, or lack thereof, can create a divide that is hard to overcome. A study published by the Public Agenda found “once an organization became tainted in [donors’] minds, they never gave to that particular organization again.”

Part of being accountable is also to have the right infrastructure in place to assist with the reporting, tracking, and communications. Annual audits are a must, and being able to give auditors, grantors, and stakeholders a clear trail to verify the accuracy of financial statements and donor intention is critical. As you look for ways to satisfy the demands of outcome measurements, be sure that your accounting system not only tracks and reports outcome measurements on financial statements, but that it can also be used to budget outcome measurements for accurate forecasting. In terms of your organization’s effectiveness, information on outcome measurements can be factored into financial data and presented to external and internal constituents, showing a powerful snapshot of your accountability and program performance with the funds you are receiving.

Likewise, keeping donor information in a comprehensive system allows for acknowledgement of donations in a timely manner, storage of communication histories, usage of donor profiling, creation of reminders for following-up, and the personalization of communications with the programs and projects that energize your giving community.

At the end of the day, it’s the people in your organization or the nonprofit accounting service firm you are using, who are dedicated to your mission, that use these tools to demonstrate the accountability, transparency, and stewardship needed to keep the organization’s integrity intact—and keep your donors and grantors contributing to your cause.

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.

Non-profit Accounting Success Step 2

Reducing Costs with Back-Office Process Optimization (BPO)

The financial accounting outsourcing value proposition shifts with BPO. With a thorough assessment and analysis of your back-office operations and the reorganization of how processes are transacted, costs will be reduced. Additionally, service levels of your accounting functions will be increased by placing people with the appropriate level of expertise over each of your respective processes.

Working with an outside accounting partner will:

Significantly reduce overhead – The finance and accounting back-office is a cost center and does not generate income.
Optimize processes and improve workflow.
Allow management to spend more time and effort on your mission.
Improve back-office operational efficiencies that impact your mission.
Re-direct Finance and Accounting expenses to pay for new programs and events.

Non-profit Accounting Success Step 1

Understanding Mission vs. Back Office

Your mission is the heart of your organization. Your focus should be on the cause you support, and your ability to evolve as needs change. However, you must at the same time manage your organization effectively.

Your organization is made up of two key areas, your mission and your back-office. Your mission is the fuel that propels your organization forward and it encompasses fundraising, community outreach, donor communication and messaging, not to mention meeting the needs of the cause and/or community you serve. While your back-office includes the stabilizing functions such as: HR, payroll, benefits, accounting, finance, grants, donation processing, regulations, IT, and tax. These supporting functions stabilize your vision and provide the resources necessary to support your mission.

Mission vs. Back-Office

Your purpose and first priority is your mission. The more time your staff and volunteers can spend on your mission the better. However the back-office supports the mission, and typically needs specialized expertise. The back-office can inhibit or enable growth, and is the primary place to look for accounting process improvements and cost reduction. The more streamlined and cost effective the process – the more time and money you can spend directly on your cause. This is where the option of using a third party comes in. Engaging with a high level accounting service provider to complete back-office processes can be a great way to reduce costs while at the same time improve both quality and efficiency.

Nonprofit executives acting as Controllers, CFOs acting as Bookkeeper, and Accountants acting as HR Managers, all create inefficiencies and risks. All too often nonprofits are forced to hire over qualified people to handle basic needs which unnecessarily increases overhead costs. Worse yet is asking under qualified staff to take on tasks which they are not trained to handle which increases liability and provides delayed, inadequate or inaccurate results.

Supporting Your Mission vs. Managing Processes

Many organizations do not need and/or cannot afford a full-time Chief Financial Officer (CFO) or Controller. What nonprofits often do is place the CFO/Controller responsibilities with the Director of Finance and Operations or with the most capable finance/accounting executive on staff. The problem with this approach is that the person placed in charge may not have the right skill set or experience to fulfill the role of CFO. Partner with a service provider to complete the accounting functions bridges the gap between the back-office and the mission without having to hire over or under qualified people.

4 Steps to Accounting Success

Accounting is a very broad topic, and organizations have many different options and services to complete these functions. Nonprofit organizations are constantly looking for ways to make their dollars go further and partnering with a third party that provides high level accounting and transactional services can be a great option to do just that. If you have considered working with an outside CFO or accounting firm as an option, but aren’t sure if it is right for your organization – this whitepaper will help you gain the insight you need in order to make the best decision for your organization.

Over the coming weeks, we will cover 4 steps to establish a successful accounting practices including:

Step 1: Understanding Mission vs. Back Office

Step 2: Reducing Costs with Back-Office Process Optimization

Step 3: When is Third-Party Accounting a Smart Move for Nonprofits?

Step 4: Resources and Skills Properly Leveraged to Economies of Scale