Sometimes accounting for nonprofits can be a nightmare! Yes, middle of the night, cold sweat, heart racing, and legitimate nightmare. The good news is, it doesn’t have to be. Being prepared, having the right tools, and learning to identify potential risks in your overall accounting process can lead to restful nights of sweet dreams. Read on to learn more.
Corrections happen and allocations are necessary. However, too many reclassifications and constant modification of allocation methodologies is a cause for concern. Organizations are often under pressure to show the greatest value for every dollar spent, and creative accounting approaches oftentimes create more problems than they solve.
Inconsistent overhead methodologies and multiple corrected journal entries indicate someone is either trying to hide an expense or might lack competency in their job. Allocation adjustments provide a distorted view of spending habits for the organization and can cause tremendous headaches during the audit process.
Be vigilant and proactive. Follow easy and straightforward steps for better over accounting for your nonprofit, financial management, tracking, and reporting across the entire organization to avoid an audit nightmare.
- Look closely at your current accounting software:
- Does your software currently offer an audit feature or audit trail?
- Do you have ways to track accountability of transactions within the system?
- Can your software assign expenses to specific nonprofit categories (program services, fundraising and operations, for example)?
- Do you have existing policy and documentation requirements that provide a good “checks and balances” process to ensure accurate financial statements and reports?
- Ensure you regularly run reports (monthly or quarterly) to look for expense and allocation discrepancies.
Here at RBP Methods we understand that choosing the best financial software can be complicated. However, we also understand the importance of selecting a solution that will lead to your financial peace and success. That is why we take a vested interested in each of our customers uniquely. It is our goal to provide each customer with the solution that best suits their unique needs. For more information on an accounting for nonprofits and software solutions to help ensure you’re ready for audit, contact us, today.