Nonprofit Financials – Get Them Done Faster at Month-End
A nonprofit’s monthly financial statements communicate critical information to the executive director and the board. Sometimes, these readers can be so eager to see the year-to-date results that they want accountants to by-pass procedures they believe must be performed to avoid distributing misleading information. Here are some common problems accountants experience, as well as some ways to speed up completion of the financials without compromising important procedures.
Waiting for bank statements: Complete recording of revenue depends in part on reconciling accounting records with the bank, as can complete recording of expenses, and it’s good to have this done before financial statements are distributed. Do you have to wait for the bank statement to arrive in the mail? Not any more! Thanks to the internet, financial managers can – and should – have read-only access to all their organization’s bank accounts.
Waiting for invoices to come in the mail: First, estimate the amount due on each invoice you’re waiting for and decide whether that amount will have a material effect on the results of operations. If an invoice is small, ignore it and don’t post anything. If the amount is too big to ignore, contact the vendor and request an estimate or an electronic version of the invoice. Post estimates to Accrued Expenses rather than Accounts Payable, and reverse the entries on the first of the following month. When you get the bills, post them to AP as you normally would.
Balance sheet accounts that are difficult to reconcile: It’s great to tie out all balance sheet accounts every month, but don’t let minor discrepancies hold up your reports. Unless you have large, unexplained differences, go ahead and issue your reports and complete the reconciliations later. What’s a large amount? One that’s big enough to cause users to make different decisions than they would if the amount were explained.
Gathering receipts and other back-up for credit card purchases or travel expenses: Sometimes, receipts and coding guidance for charges to cards entrusted to employees is missing when it’s time to close the month or pay the bill. In order not to hold up financial statements, post debits for missing charges on employee cards to Employee Receivables so they appear on the balance sheet as an asset. Think about them as rough equivalents to cash advances for travel. Once you have the receipts in hand, you can journal-entry them to the appropriate expense account.
Vendor invoices missing expense coding, or with coding that’s wrong: It’s worth your time to get accurate and complete expense coding – account, program, and funding source – before you post transactions. You can help managers and others get it right by using a custom-made rubber stamp that has a blank space where they are to write each bit of data that you need. Or you can set up a purchase order system, which requires the coding to be provided before a purchase is approved.
Executive directors or other colleagues’ urgent requests for reports or projects at the last minute: We’re all familiar with this one, and it can be difficult to manage without putting in overtime. It helps to be proactive: make sure you have a calendar showing when grant reports are due. At month-end before the closing process starts in earnest, ask your executive director about other requests that may be coming in the next week or two.
Don’t expect to resolve all of these difficulties in one month. Tackle what you can, and it won’t be long before you see results.
Filed under: Business