How are your nonprofit’s accounting processes running these days? Even well-managed organizations can benefit from periodically reviewing how financial tasks are performed. Whether you’re planning budgets, processing invoices, closing the books or preparing financial statements, identifying and eliminating inefficiencies can improve your organization’s financial operations.
Focus on core processes
Certain financial functions deserve greater attention than others. For example, it’s essential that those responsible for your organization’s financial oversight (such as your CEO and board finance committee) promptly review monthly bank statements and financial statements. They should look for obvious errors or unexpected amounts and investigate unusual variances from budget or prior-period results. If your nonprofit isn’t performing this task efficiently, ascertain the reason and find a solution. It could be one person who doesn’t understand the role or a systemic problem with multiple points of failure.
Another important area is invoices. Establish a policy requiring invoices to be submitted promptly after month end. Too many adjustments — or waiting for employees or departments to weigh in — can waste time and delay the completion of your financial statements. Establishing a consistent month-end close process with clear deadlines and responsibilities can help improve both timeliness and accuracy.
You may be able to save days at the end of the year by reconciling your balance sheet accounts each month. It’s a lot easier to correct errors when you catch them early. Also, be sure your organization is reconciling accounts payable and accounts receivable subsidiary ledgers to your statements of financial position. Regular reconciliations strengthen internal controls and can help identify fraud or accounting errors before they become more significant.
Get more from your technology
Many organizations underuse the accounting software package they’ve purchased because they haven’t invested the time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions and teach time-saving tricks and shortcuts to staff. If your software is outdated or doesn’t meet your nonprofit’s needs, prioritize its replacement. Modern cloud-based accounting systems often include workflow automation, approval routing, document management and dashboard reporting that can significantly improve efficiency.
With the right software, you should be able to standardize financial reports with little or no modification. This will reduce input errors and provide helpful financial information at any point, not just at month end. Many accounting platforms also allow recurring journal entries, automated bank reconciliations and electronic invoice approvals, reducing manual effort while improving consistency. Also consider automating standard journal entries and payroll allocations within your accounting software. Many systems can automate payroll allocations to various programs and generate vacation accrual reports. But periodically review any estimates against actual figures and adjust to actual amounts before closing your books at year end.
Prioritize continuous improvement
Accounting processes shouldn’t remain static. As your nonprofit grows and technology advances, your finance function must evolve. Periodically review workflows, strengthen internal controls and adopt appropriate automation. These efforts can improve efficiency while providing management and your board with more reliable financial information. Contact us to evaluate your accounting processes and identify opportunities to strengthen your organization’s financial operations.
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