Are Your Accounting Operations Aligned with Your Impact Mission?
Some nonprofit executives and board leaders get the connection between access to solid and timely financial information and mission results. Without good numbers, strategic planning, fundraising and more importantly fulfilling the organization’s mission can be futile. Leaders face two challenges: getting good numbers and understanding how good numbers and achieving organizational goals are connected.
First, let’s look at how to ensure you are getting good numbers. As the executive director or program manager of a nonprofit organization have you noticed the following things at your nonprofit organizations or asked yourself these questions:
- Why is there so much paper on the accounting staff’s desks?
- Why does your accounting team work A LOT of hours?
- Why don’t I get timely financial reports?
- How do I read the financials – what do they mean?
- Why are the financials so complicated? Our nonprofit is no different than any other.
- The accounting department told me it HAS to be done this wayor the system cannot provide you that information.
- I have stopped asking for information that I just cannot get.
Has anyone in your accounting team asked you the following questions?
- What financial information do you need to manage your department/program?
- How often would you like this information?
- Is the information that you are provided useful?
As these questions are pondered, a divide is created amongst the accounting and program staff within the nonprofit organization. Frustration grows daily for both program leaders and accounting staff. The program staff thinks it must be easy for the accounting staff to ��push a button and provide ad hoc requests immediately.�� The accounting staff resents that they do not get the right information from the program staff (i.e. coding, receipts, timesheets, etc.). With a little communication, several of the perceptions can be changed.
The program staff might want real-time information which is challenging because the schedule for recording information in the financial reporting system might be weekly and/or monthly – not daily. Salary expense is typically an organization’s largest expense, and the timing for accessing this information depends on your payroll cycle (bi-weekly or semi-monthly) and your time tracking system (i.e. allocation of personnel expense to programs, administrative and fundraising classifications).
Common Enhancements to Accounting Operations
Over the years, many nonprofit organizations have come to Marcum asking these similar questions. We have found that if we spend some time with them to listen to their concerns, understand their processes, and review the processes and systems in place to capture and report financial data; we can assist them by focusing on the following areas:
Technology – GO paperless. Establish systems that allow for enhancing processes, workflows and transparency of information to all staff. Some organizations could have an online accounts payable system which provides a lens into vendor invoices daily – such as when the bill was received, if it has been approved for payment and when the vendor received it.
People – Hire the right people with the experience and skills to perform the right tasks at the appropriate times. The organization may have long-term employees that operate under a legacy infrastructure with outdated processes and procedures that fail to generate the financial reports that would assist management today in making effective, informed decisions. As a result, management struggles primarily with obtaining the necessary financial information to manage the business and to monitor and report on grant activity or business functions.
Communication and Training – provide continual communication to all staff on the processes and procedures. At the start, incorporate the use of the organization’s systems in the employee onboarding process. Provide at least quarterly updates to communicate timelines for financial information availability. Provide sufficient advance communication and regular updates to support the implementation of new systems and tools to utilize the information available to make good business decisions.
Assumption of Accountability – Have the people that are spending the money be responsible for monitoring and managing their budgets. The accounting team should be providing the tools and information to track the costs, but they are not running the programs and don’t know what resources are needed to complete the objectives of those activities. The accounting staff will have insight into the overhead costs, and they will need to educate and provide information to the program staff of the allocation methodology for these costs.
Consider an Assessment of Accounting Operations
You may need an objective look at your organization. Consider having Marcum perform an assessment that will help you to:
- Understand the current accounting and reporting procedures, workflow, and related staffing structure, and develop recommendations to maximize efficiency and effectiveness in alignment with the organization’s operations and priorities;
- Understand the current board and management level reports, and develop recommendations on ways to provide better alignment and visibility in financial reports; and
- Obtain recommendations for advancing efficient and effective operations within financial management, human resources and technology areas that support operational functions, all with an eye to support mission impact.
Before you Launch an Accounting Assessment
The urgent and the important are often not the same. When it comes to investing in a review of accounting operations, first things first is an important guide. In our experience, the organizational context and specific strengths and aspirations inform how and when to best complete an accounting review. If the CEO or CFO is retiring soon, it may or may not be a good time. If the Board is in disagreement about organizational priorities, it will be hard to implement any changes. So while accounting operations reviews are important, we always look at your unique situation in determining when and how it is best to get started. And sometimes it is not with accounting.