Guidelines and procedures are put in place for a reason. They help hold others accountable and make the workplace efficient and safe. As this blog series comes to a close, I want to emphasize the importance of following accounting best practices and why they matter to your nonprofit organization. As a quick recap, in my first blog I pointed out basic best practices to keep in mind for achieving a high functioning accounting department and in my second blog I highlighted 6 steps to kick start the process. Let’s discuss why following accounting procedures is key to your organization’s success, here are several critical reasons why you should hold your accounting team to a high standard.
- You are accountable to report to the IRS and your state. The numbers in your reports and the reports created from your accounting department/systems are what you will submit. Make sure they represent the true and honest reporting of the organization.
- Controls are an important piece of how you handle the funds that come into the organization and go out of the organization. Proper controls help minimize risk. Minimizing risk also helps to minimize fraud and remove temptation to steal.
- Well written policies and procedures help drive consistent and efficient work within the organization. Policies and procedures can help overcome bad habits and support the organization in times of crisis.
- The right financial reports look different depending on the audience. Make sure you are getting the right reports to the right people. Detail reports comparing budget to actual to prior year by account by department are great at management level but are these the reports that the whole board needs?
- It’s critical to have a knowledgeable and capable bookkeeper, finance director, or CFO, whether a volunteer, contractor, or staff person. Annual filings to the state and the Form 990 are complicated and should be prepared with a clear eye of competence.
- Expert help should be there from day one. Remember you are the one with the vision and passion for the programs, you don’t have to also be the bookkeeper. Start with a knowledgeable individual as soon as possible to avoid any costly and time-intensive clean up later.
The bottom line here is that donors and regulators expect you to effectively run your organization. By doing so, you can better provide the impactful programs that your mission statement defines. This includes making the right decisions inhouse to ensure that your accounting department is operating properly and that your organization’s financial records are safe and accurate. Follow the rules now, so that it doesn’t come back to haunt you later. Now that you know basic nonprofit accounting best practices, a game plan to get started and why having clear procedures is crucial, it’s time to evaluate your own accounting team and help it achieve it’s highest potential.
Want to learn more about what BerganKDV can do for your nonprofit? Contact us here or sign up for this webinar that will explore how the finance field is continuously reshaped, and how top nonprofit organizations manage their accounting teams in an ever-changing environment.