Establishing an accounting process for your nonprofit organization is not a one-and-done deal. You must commit to continually improve your nonprofit’s accounting system to prevent delays, errors, and inefficiencies. Whether you want to create an annual budget or prepare financial statements for a donor meeting, you should make it a priority to present the most updated and accurate information that clearly describes the financial health of your organization.
A process full of delays, errors, and inefficiencies prevents your accounting team from responding to rapidly changing organizational demands.
What are the Common Causes of Inefficient Accounting Departments?
Understanding the most influential causes of inefficiencies can help your nonprofit improve its accounting processes. Target manually repetitive tasks that wear down your accounting team. Performing repetitive accounting tasks can produce more delays and errors. Then, define any unclear designation of accounting responsibilities, which means every member of the accounting department must have a defined role. There also should not be any redundancies of accounting duties. Eliminate outdated tools and processes that contribute to inefficient accounting processes. What was once an efficient accounting process can become irrelevant in fewer than five years. Finally, a lack of feedback from front-line accounting employees leaves management in the dark when it comes to identifying inefficiencies.
What Accounting Areas Should My Nonprofit Target?
Some accounting areas require much more scrutiny for eliminating delays, errors, and inefficiencies. Start by reviewing the procedures used to create monthly accounts payable and receivable statements. The entire accounting department should clearly know how much money is coming in before determining which creditors to pay first. Ensure the payroll system is current, with special attention focused on accurately deducting wages for taxes and other expenses such as health insurance and retirement savings. A lack of tax compliance and reporting can close down your nonprofit organization permanently or at least force it to lose its highly-coveted nonprofit status. Check the reconciliation process to confirm that all income and expenses balance each other out or generate a surplus of money that your nonprofit can use to boost its agenda.
How Can My Nonprofit Improve Its Accounting Processes?
Your nonprofit organization should take several steps to improve its accounting process. First, train every employee of the accounting department to follow government-mandated accounting principles, as well as use the most advanced accounting tools. Second, with a properly trained team of accounting employees, solicit feedback to receive suggestions on how to improve processes. Third, reexamine accounting processes by following a schedule, whether it is once a month or a quarter. Fourth, standardize the accounting processes used by every other department. Finally, your nonprofit’s managers should use project management software that includes a feature to factor in accounting processes.
The Bottom Line: Improved Accounting Processes are Good for the Bottom Line
After all the hard work to raise money and cut expenses, you do not want your nonprofit to fall into a financial hole due to poorly executed accounting processes. If your accounting department finds itself overwhelmed with responsibilities, consider outsourcing certain accounting tasks to allow your accounting team to focus on the most important processes.