4. Accounting for Incompetence

Financial transparency takes the right accountant, tools, and processes

Photo taken last year at this time in DC when I was looking up and counting Cherry Blossoms.

Happy Tax Day, another dreaded time of year for CPAs, accountants, and bookkeepers is coming to an end. As a nationally recognized day, perhaps it has you reflecting on best practices or how to improve your organization’s financial position and processes?

Funders expect fiscal transparency and financial accountability, and I believe those moral grounds are at the heart of any reputable nonprofit.

In my executive leadership for a statewide nonprofit I experienced inheriting a bookkeeper who was beyond sketchy in his reporting and processes. For the record here are the top five qualities of a competent and credible bookkeeper:

1. Sends monthly reports on time

2. Runs reports directly from the accounting platform and does not make spreadsheets with broken formulas to “tell the story” of your financial status

3. Communicates and responds dependably

4. Ensures you are aware of all accounts and lines of credits being used by the organization and 501(c)3 during your onboarding process, not years later

5. Does not “lose” $36,000 or any amount of money from your budget

The precise antithesis of these five qualities is what I had to deal with in the inherited bookkeeper. Later when I was able to hire an incredibly competent and thorough bookkeeper and once we received the books from him (which took months and not weeks) there were tons of post journal entries in the books that he had been making over those months. We figured out where the $36,000 ended up and it was definitely not lost.

When the separation finalized with the chapter who was responsible for employing the accountant I inherited, it came out that there were accounts and credit cards under our 501(c)3 that I was never informed about. I had not seen a single statement from those accounts and those accounts had signers that had not been with the organization for years or decades. This opened our organization up to substantial risk and liability and proved just how dangerous incompetent bookkeeping practices can be. Additionally, having a knowledgeable CPA or accountant board member helps to avoid these kind of scenarios, as this role brings a necessary checks and balance to the organization.

As stated in previous articles, I learned a lot from that experience.

Here is how your functional bookkeeping should look. Annually, there is a third-party audit, 990 filing, and budget. A solid bookkeeper or accountant will help you build systems that have clear processes and bring cost efficiencies to the organization. Monthly for the board report you will need a Balance Sheet, P&L, and Cash Spent Per Month with a Forward Analysis. Here is an example of how we built out a Cash Analysis Report.

Other areas a good bookkeeper/accountant can help you with include, contributing to big picture fiscal practices, preparing the annual budget, and financial risk mitigation. For example, my new bookkeeper was able to upgrade our financial tools and mitigate risk by recommending proper insurance coverage along with a cyber security policy. When you have clean books and organized chart of accounts you can run comprehensive monthly reports and easily sync an annual budget into the monthly reporting.

I have had three excellent bookkeepers since my nightmare experience, one at that organization, one at the new nonprofit I manage, and one personally. I am so grateful for their help and guidance. On this Tax Day we should give thanks for the accountants and bookkeepers who keep us honest and make our lives easier. The great ones have helped me find sound fiscal solutions and now it’s my turn to pay it back. Here are few of handy tools and financial life hacks that make nonprofit management easier:

Dext

An easy way to take a picture of receipts and file expenses from your phone. This syncs with QuickBooks and makes it easy for your bookkeeper to review and reconcile.

Genius Scan

If you don’t have a lot of expenses and receipts, Genius Scan makes it easy to scan a receipt with your phone and then sends it as a PDF to email or on a shared server.

Intuit QuickBooks Online

A number of small businesses and nonprofits are able to utilize QuickBooks Online now that it has become more affordable and flexible to your organizational needs. The online version allows the bookkeeper and leadership to easily share information, process financial transactions, and run reports.

Salsa Labs

This is a comprehensive platform for newsletters, CRMs, interactive web pages, payments, fundraising campaigns, and more. It can be pricey, but I was able to save on administrative overhead costs with this integration.

Techsoup

This is what every nonprofit needs in their lives for discounted software and digital tools.

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