Many organizations get stuck in procedural ruts because it is easier in the short term to continue doing things the way they have always been done. However, it is a good idea to regularly review a not-for-profit’s accounting function for inefficiencies and oversight gaps. It would be considered good practice to conduct a review once a year, or 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 during a review:
Cutoff policies. A nonprofit should set and adhere to monthly invoicing and expense recording cutoffs. For example, require all invoices to be submitted to the 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. It may be possible to save considerable time at the end of the year by reconciling bank accounts shortly after the end of each month. It is easier to correct errors when caught early. Also, accounts payable and accounts receivable data should be reconciled to the statement of financial position.
Processing in batches. Instead of entering only one invoice or processing only one check at a time, set aside a block of time to do the job when there are 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, the 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 their accounting software package 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 to install updates as they become available and know when it is time to buy new packages — for example, when software is no longer “supported” by the vendor.
Accounting systems can become inefficient over time if they are not monitored. Look for labor-intensive processes that could be automated, or for procedures that do not add value and might not be needed. However, it is important to keep in mind that as accounting systems are evaluated and updated, it is essential to maintain the proper segregation of accounting duties in order to prevent fraud.
Contact us for more information or if you need help streamlining your accounting function.