Financial reporting isn’t all about profits. Not-for-profit entities can also benefit from implementing formal accounting processes. From preparing budgets and monitoring financial results to paying invoices and handling payroll tax, there’s a lot that falls under the accounting umbrella. Are these tasks, and others, being managed as efficiently at your organization as they could be?

Start with invoicing

A good first step toward accounting function improvement is creating policies and procedures for the monthly cutoff of recording vendor invoices and expenses. For instance, you could require all invoices to be submitted to the accounting department within one week after the end of each month. Too many adjustments — or waiting for employees or departments to weigh in — can waste time and delay the completion of your financial statements.

Another tip about invoices: It’s generally best not to 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.

You also may be able to save time 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, reconcile accounts payable and accounts receivable subsidiary ledgers to your statements of financial position.

Think through data collection

Designing a coding cover sheet or stamp is another way to boost efficiency. An accounting clerk or bookkeeper needs a variety of information to enter vendor bills and donor gifts into your accounting system. You can speed up the process by collecting all the information on the invoice or donor check copy using a stamp. Route invoices for approval in a folder that lists your not-for-profit’s general ledger account numbers so that the employee entering data doesn’t have to look them up each time.

The cover sheet or stamp also should provide a place for the appropriate person to approve the invoice for payment. Use multiple-choice boxes to indicate which cost centers the amounts should be allocated to. Documentation of the invoice’s payment should also be recorded for reference. And your development staff should provide the details for any donor gifts prior to your staff recording them in the accounting system.

Optimize accounting software

Many organizations underuse the accounting software package they’ve purchased because they haven’t invested enough time to learn its full functionality. If needed, hire a trainer to review the software’s basic functions with staff and teach time-saving tricks and shortcuts.

Standardize the financial reports coming from your accounting software to meet your needs with no modification. This not only will reduce input errors but also will provide helpful financial information at any point, not just at month’s end.

Consider performing standard journal entries and payroll allocations automatically within your accounting software. Many systems have the ability to automate, for example, payroll allocations to various programs or vacation accrual reports. But review any estimates against actual figures periodically, and always adjust to the actual amount before closing your books at year end.

Ongoing review

Accounting processes can become inefficient over time if they aren’t monitored. Look for labor-intensive steps that could be automated or steps that don’t add value and could be eliminated. Also make sure that the individual or group that’s responsible for the organization’s financial oversight (for example, your CFO, treasurer or finance committee) promptly reviews monthly bank statements and financial statements for obvious errors or unexpected amounts. Contact us for more tips on how to improve the accounting function at your nonprofit.

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How accurate is the amount reported in your company’s perpetual inventory system? To best answer that question, a physical count is essential at year end. For calendar-year entities, year end is fast approaching on December 31.

Planning tips

Though physical counts may be seen as time consuming and disruptive, a well-executed count of what’s on-hand can provide valuable insight into operational efficiency. Here are five tips on how to prepare for your count to maximize the benefits and minimize the hassle.

1. Order (or create) prenumbered inventory tags. Most companies use two-part tags to count inventory. One tag stays with the item on the shelf; the other is returned to the manager at the end of the count. Tags are numbered sequentially to ensure the manager can account for every tag issued. Using a tagging system prevents items from being counted twice or omitted. Each tag should identify the part number, location, quantity and person who performed the count. To avoid scrambling around last minute, assign someone in your accounting department to get this task done at least a month before your count is scheduled to start.
2. Preview inventory. Most companies do a dry run a few days before the count to identify any potential roadblocks and determine how many workers to schedule. This makes the count more efficient and gives warehouse personnel the opportunity to correct any foreseeable problems, such as missing part numbers, unbagged supplies and an insufficient amount of inventory tags.
3. Assign workers to count inventory. Assemble two-person teams to prevent fraudulent counts. Assign each team a specific area of the warehouse to count. (A map often helps workers identify count zones.) Never give employees inventory listings to reference during the count — otherwise, they may be tempted to duplicate the amount from the listing, rather than bring attention to a possible discrepancy.
4. Write off any unsalable items. All defective or obsolete items should be thrown away or recycled before the inventory count begins. There’s no sense counting items that will be written off.
5. Pre-count and bag slow-moving items. To make the physical count faster, some items that aren’t expected to be used before year end can be counted a few days in advance. Pre-counted items should be tagged and placed in sealed containers. If a broken seal is noticed on the day of the actual physical count, the items in the container should be recounted.

Inventory values

Under U.S. Generally Accepted Accounting Principles (GAAP), inventory is recorded at the lower of cost or market value. However, estimating the market value of inventory may involve subjective judgment calls, particularly if your company converts the goods from raw materials into finished goods available for sale. The value of work-in-progress inventory can be especially hard to objectively assess, because it includes overhead allocations and, in some cases, may require percentage of completion assessments.

The value of inventory is always in flux as work is performed and items are delivered or shipped. To capture a static value at year end, it’s essential that business operations “freeze” while the count takes place. Usually, it makes sense to count inventory during off-hours to minimize the disruption to business operations. For larger organizations with multiple locations, it may not be possible to count everything at once. So, larger companies often break down their counts by physical location.

Your auditor’s role

If your company issues audited financial statements, one or more members of your external audit team will be present during your physical inventory count. Auditors aren’t there to help you count inventory. Instead, they’ll observe the procedures (including any statistical sampling methods), review written inventory processes, evaluate internal controls over inventory, and perform independent counts to compare to your inventory listing and counts made by your employees.

They’ll also look for obsolete, broken or slow-moving items that need to be written off. Be ready to provide them with invoices and shipping/receiving reports. Auditors review these documents to evaluate cutoff procedures for year-end deliveries and confirm the values reported on your inventory listing.

For more information

Contact us to discuss physical inventory counting procedures. We can help you get it right and investigate any discrepancies between your count and the amount reported in your company’s perpetual inventory system.

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Bookkeeping is essential to running a business. QuickBooks® is one of the most popular software programs for this purpose because it offers numerous features that other programs may not have.

Functionality

In addition to being affordable, QuickBooks® has many features to help small and midsized businesses optimize operations and pursue growth opportunities. This includes customized solutions for accountants, contractors, manufacturers, nonprofits, professional services, retail, wholesalers and distributors. The software provides a one-stop solution for:

• Tracking income and expenses,
• Creating invoices and reports,
•  Estimating and monitoring projects and job costs,
•  Filing payroll, sales and income taxes,
•  Managing inventory and fixed assets,
•  Reporting and analyzing financial performance, and
•  Budgeting and forecasting future results.

It also integrates with other business software programs, such as payroll and e-commerce platforms, including Amazon, eBay and Shopify.

Collaborative tool

QuickBooks® houses real-time financial information, so it provides a platform to collaborate with outside accounting professionals. This software allows you to give your accountant secure access to your books so they can optimize your use of the platform. Specifically, your CPA can:

• Evaluate your financial data,
•  Offer advice on business decisions, growth strategies and accounting best practices,
•  Plan for state and federal taxes, and
•  Uncover errors or omissions.

This allows you to focus on your company’s operations, while your external accountant concentrates on financial reporting and tax matters. With this approach, you can can free up resources and improve the accuracy of the reports you rely upon to run the company. In addition, it allows you to make fact-based decisions about the future of your business.

Is QuickBooks® right for your business?

QuickBooks® offers a range of accounting software packages to choose from. We have experience helping business owners and controllers maximize the benefits of these packages, as well as solutions provided by other software manufacturers. Contact us to help you evaluate the options, based on the current needs of your business.

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