Many organizations get stuck in procedural ruts because it is easier in the short term to continue doing things the way they’ve always been done. But it generally pays to regularly review your not-for-profit’s accounting function for inefficiencies and oversight gaps. You might plan to conduct a review once a year or perform an assessment whenever significant changes, such as staff turnover or the introduction of new software, warrants one.
Room for improvement
Be sure to consider the following items in your review:
Cutoff policies. Your nonprofit should set and adhere to monthly invoicing and expense recording cutoffs. For example, require all invoices to be submitted to your accounting department by the end of each month. Too many adjustments — or waiting for staffers or departments to turn in invoices and expense reports — waste time and can delay financial statement production.
Account reconciliation. You may be able to save considerable time at the end of the year by reconciling your bank accounts shortly after the end of each month. It is easier to correct errors when you catch them early. Also, reconcile accounts payable and accounts receivable data to your statements of financial position.
Processing in batches. Do not enter only one invoice or cut only one check at a time. Set aside a block of time to do the job when you have multiple items to process. Some organizations process payments only once or twice a month. Make the schedule available to everyone and fewer “emergency” checks and deposits are likely to surface.
Increased oversight. Make sure that the individual or group that is responsible for financial oversight — for example, your CFO, treasurer, or finance committee — reviews monthly bank statements, financial statements and accounting entries for obvious errors or unexpected amounts.
Software use. Many organizations underuse the accounting software package they have purchased because they have not learned its full functionality. If needed, hire a trainer to review the software’s basic functions with staff and teach time-saving shortcuts. Make sure you install updates as they become available and know when it is time to buy new packages — for example, when your software is no longer “supported” because the vendor has gone out of business.
Accounting systems can become inefficient over time if they are not monitored. So look for labor-intensive steps that could be automated or procedures that don’t add value and might be eliminated. Often, for example, steps are duplicated by two different employees or the process is slowed down by “handing off” part of a project. That said, it is essential to maintain the segregation of accounting duties to prevent fraud.
Contact us to learn how Cordia’s outsourced accounting service can help streamline your accounting function. We view ourselves as your internal finance and accounting department, and we are always looking for ways to leverage proven technologies to streamline and improve the efficiency of our services while maintaining an effective system of internal controls.