In all of my experience setting up bookkeeping and accounting systems for private business and non-profit entities, the most common mistakes I encounter occur most often due to a misunderstanding of the financial needs of the organization and how these needs translate to the bookkeeping system. It is quite a shame to find well-meaning directors who have managed to complete all the legwork involved in setting up their non-profit, frustrated and confused over this process. Usually, I am called into these situations much too late, and it takes a considerable amount of time, energy and money to correct problems that had they been caught early enough could have been avoided. Seeking out the appropriate individuals to help assist in the set-up of what will be one of the most important processes that occurs in the organization, managing the financials, should be at the top of any directors to-do list.
- Know What You Don’t Know
In our industry, a little bit of knowledge can be a dangerous thing. Well meaning directors often have some general understanding of bookkeeping and accounting principals, and this can make them feel that perhaps they can forego the cost of hiring a trained professional and muddle through on their own. It is tempting when you are running a non-profit with limited funds to forego the cost of hiring trained professionals, yet a smart social entrepreneur knows what he/she doesn’t know and instead, finds someone trusted to advise him or her in those areas. Unless you are a CPA, or you happen to have one on your board, then your first phone call should be to a CPA who specializes in non-profit organizations. This resource is invaluable and could end up saving money and time which as we all know, are at a premium especially in a non-profit organization. CPA’s are NOT bookkeepers, this is a common misconception. Certified Public Accountants are highly skilled and certified tax advisors who can answer complicated tax questions and advise you on the best course of action in matters of state and federal regulations pertaining to your non-profit. Many non-profit organizations are funded with grant money or what we call special funds in our industry. In many cases, there are strict requirements on how this money is handled and future funding could very well depend not only how well you manage these dollars, but how well you document your handling of these dollars. After careful consideration of your needs and requirements, visit with your trusted CPA and come armed with a comprehensive list of questions so that you maximize your time in their presence and don’t waste precious dollars calling them up after the fact with things you forgot to ask, remember that CPA’s bill by the minute just like attorneys. - Hire a Skilled Bookkeeper or Train Yourself?
Although many CPA’s are not bookkeepers, chances are that they either have bookkeepers in their office that can do the bookkeeping for you or who may be able to train you to do it yourself. Many erroneously think that a CPA does bookkeeping work. Bookkeepers are to CPA’s what paralegals are to attorneys; they do a majority of the busywork for a fraction of the cost. Typically most CPA’s charge anywhere from $150 to $350 an hour, therefore, you most definitely do not want them doing data entry of your checking and loan accounts, instead, you want them answering the tough technical tax questions and guiding the entire process. However, this is not to say that all bookkeepers are created equal. Because the bookkeeping industry is not as regulated as the tax industry, many hang their shingle out without much experience other than they have had an opportunity or two to play around in a popular accounting system and now feel they can effectively play around in yours. Do not be fooled, I have come in behind many so-called “bookkeepers” only to find that they most clearly did not have an understanding of how to manage a full charge accounting system. Ask for referrals from your CPA or trusted advisors; verify credentials, training and experience. A bookkeeper with a degree in finance, accounting or business is preferable. Ask for references and check them. Give credence to a bookkeeper or bookkeeping firms who have previous experience working with non-profit organizations. And lastly, do a criminal background check and make sure they have proper insurance and bonding required for their firm. For a good qualified outside bookkeeper or bookkeeping firm, you can expect to pay anywhere from $55-$105 per hour, depending on their education, skills and experience. The benefit to outsourcing this to a firm or contractor is that you can use them when you need them without begin obligated to provide a minimum number of hours or benefits. However, costs can be cut considerably if you hire an employee in the bookkeeping role. If you are willing and able to place them on the organizations payroll and guarantee work hours and benefits, you can expect to pay $18-$28 per hour for someone with appropriate credentials. - Training Yourself
In many cases a non-profit is so small that funds for even a part-time bookkeeper is not possible. This does not mean you cannot train yourself or a qualified staff member or volunteer. If you are willing to put in the time and effort, you can set-up your own system with a popular accounting program like QuickBooks. QuickBooks even offers a version that is designed specifically for non-profit organizations. There are many private consultants who also offer training, seminars and workshops to teach you not only how to run the software but also can give you a course on bookkeeping fundamentals. Knowledge of bookkeeping fundamentals is key, running the software without this understanding causes a great deal of confusion. Community colleges are also a great place to take a class to brush up on accounting skills and Intuit, the manufacturer of QuickBooks, has many wonderful resources in the form of online classes and webinars (online seminars) that you can resource by visiting www.intuit.com. As with any new endeavor there is a learning curve, make sure that you initiate this process before you actually need to run the program. Play around with sample files and numbers so that by the time you begin setting up the financials you are ready.
By taking these important steps and being committed to the path you choose, you will find that your bookkeeping system will serve your organization for years to come and become an integral part of the success of your non-profit.
By Chelsey Williams
Owner
Williams Small Business Services
Portland, Oregon
Tags: bookkeeping, cpa, non-profits
