Nonprofit Financial Statements-How to Speed up the Monthly Close

A nonprofit’s monthly financial statements communicate critical information to the executive director and the board. Sometimes, these readers can be so eager to see the year-to-date results that they want accountants to by-pass procedures they believe must be performed to avoid distributing misleading information. Here are some common problems accountants experience, as well as some ways to speed up completion of the financials without compromising important procedures.

Waiting for bank statments to arrive: Sometimes, your checking account statement doesn’t arrive in the mail for a week after month-end, and you have to hold up other procedures because you haven’t reconciled your accounting records to the bank. But you don’t have to wait anymore! Thanks to internet banking, you can have access to the checking account on-line. Internal controls over cash are not compromised if you have read-only access.

Waiting for invoices from contractors, suppliers and vendors to arrive: Ignore any that will have a negligible effect on either the reports you’re preparing or on billing to funders. If they’re too big to ignore, contact the contractor and ask for an emailed invoice or an estimate. You can post estimates to Accrued Expenses using a reversing entry to the GL; then when the bill comes in, post it to AP as you normally would.

Problems reconciling a balance sheet account: We’d all like to tie out every single balance sheet account to the penny, but sometimes perfection gets in the way of timeliness. If your reconciliation of deferred revenue is off by $5 or your prepaid expenses seem a tiny bit low, will the statement’s users make different decisions than they would if these accounts were completely reconciled? Probably not. Issue the statements and complete the reconciliation later.

Waiting for back-up for credit card purchases: Some employees just can’t seem to get their receipts turned in by the time you want to close. Rather than hold-up reporting while you wait, you can post the charges to Employee Receivables, an asset account, and continue with your close.

Lack of appropriate expense coding to programs or funding sources: Help managers and other employees responsible for coding to accomplish this timely! You can stamp each invoice that arrives with a custom-made stamp (they cost about $20) with a blank space for each bit of coding information they need to supply. You can use purchase orders so the coding is required before the purchase is made.

Requests for reports or projects at the last minute: It’s hard to say no to your boss, so urgent requests can be difficult to manage and often lead to overtime. It helps to know what’s coming up, so be proactive. Make sure you have a calendar showing when grant or project reports are due. At month-end before the closing process starts in earnest, ask your executive director about other requests that may hit your desk in the next week or two.

Don’t expect to resolve all of these difficulties in one month. Tackle what you can, and it won’t be long before you see results.

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