According to a study, by Jeffrey Burks, associate professor of accountancy at the University of Notre Dame’s Mendoza College of business, some nonprofit accounting strategies intended to save money, by not employing an abundance of administrative staff, could be costing them, in errors. The study suggests that nonprofit organizations make errors at a relatively high rate, upwards of double the amount compared to for-profit businesses.
Understandably, nonprofits often work on an extremely lean budget, focusing the lion’s share of their dollars towards their organization’s intended purpose, or mission. This strategy, albeit admirable, may be resulting in an abundance of accounting errors due to the fact that non-accounting personnel may be asked to work in areas outside of their training and expertise. Additionally, a lack of internal controls could be contributing to the errors as well. Burke’s study found that 71 percent of nonprofit accounting errors are caused by basic mistakes, such as bookkeeping and recording errors. By comparison, basic mistakes account for only 54 percent of errors in corporations.
Ensuring data accuracy is paramount to successful financial management. Manual processes are error-prone, time-consuming, and needlessly expensive. Although hiring and screening administrative staff, such as accountants and bookkeepers, can help to reduce errors, there are other steps nonprofits can take to increase accuracy within their accounting practices. One such is way to implement a Fund Accounting Software solution. A Fund Accounting Software system is an accounting package on the market geared specifically towards organizations whose monies are dedicated towards a specific purpose. A Fund Accounting Software program will automatically keep those monies separate to ensure that it is used for its intended purpose. Furthermore, Fund Accounting Software can provide the nonprofit account functionality required to effectively manage the complex, Financial Accounting Standards Board (FASB), reporting requirements of nonprofit organizations. There are additional benefits as well; they include:
- The ability to input cash receipt activity quite easily and help to organize information once it has been input.
- Increase efficiency with formatted screens which make data entry quick and accurate.
- Automate the creation of invoices, purchase orders, statements, and other documents, accurately.
- Maintain up-to-date records such as account balances, with ease.
- Built-in controls, automate the identification of duplicate entries, and can prevent other errors.
- Information is readily available at a moment’s notice.
- Improve accounts receivable with the ability to produce reports, such as customer accounts, showing overdue balances.
- Computerized accounting programs, reduces the amount of staff time spent doing accounts, and reduces audit expenses as records are neat, up-to-date, and accurate. Ultimately resulting in an overall cost savings for the organization.
A Fund Accounting Software approach will provide you with visibility into your financials that will help you understand, with precision, how each dollar is spent. This insight will better equip your organization to lower their operational costs and maximize the impact of each dollar, while reducing the opportunity for errors.
For most nonprofit organizations the primary goal and focus is to maximize time and money spent towards accomplishing their mission. With that, they still desire to maintain standards of excellence and comply with government required accounting practices. Here at RBP Methods we want to partner with you to help reach your goals. RBP Methods is a consulting company helping nonprofit and governmental agencies sort through complex decisions by providing quality services and products either directly or through our wide network of associated firms. RBP Methods has abundant knowledge and expertise regarding the nonprofit accounting software industry. We believe in providing the best possible assistance in order to help companies make the best possible choice based on their needs. Learn more about the solutions we provide.