A crucial component of a successful nonprofit accounting department is the monthly close process. This process can be a difficult decision between obtaining timely data and completing the process accurately. Each organization determines where it falls on that scale and how it works toward it. Whether your nonprofit closes in five days or 30 days, there are four key areas to examine that can accelerate the close and help make the accounting staff’s jobs more manageable.
Development Reconciliation
The majority of nonprofits have a revenue stream that stems from a development department. However, depending on their systems or processes, getting grant and donation data into the organization’s accounting records could be a challenging ask. To streamline this process, the first step of any accountant is to meet with their development team and determine what information is needed at month-end. The two departments can use this opportunity to agree on the exact data needed and develop an understanding on the definitions of the asks. The result can be a clear path and process for the month-end close. Our professionals have observed that this approach can speed up the monthly close process and make for a better working environment between the two departments.
Accuracy vs. Timeliness
There are important questions that should always be asked as part of the monthly close process, such as: What is the purpose of our monthly reporting? Who is the intended audience? What decisions are being made based on this information? By asking these types of questions, an accounting department can work to understand what details need to be in a monthly close as opposed to a quarterly or annual close.
For example, an organization that has multiple credit cards maintained by its program staff will have to wait on receipts and coding from staff. This can bring a monthly close to a halt, and form friction between accounting and other staff members. However, what if the monthly financials are on a program basis and not necessarily a line-by-line basis for decision making? In this case, it can allow accounting to make reasonable estimates as to the line-by-line items and simply accrue the expenses based on the programs or departments the staff person works for. This information is something that might be available on the first of the month instead of waiting until later in the month for the full detail. The accounting team could issue the monthly reports earlier in the month and then go back to enter the detail when the receipts are provided.
Integrations
Data can originate from many places and the work to get it into the accounting system can be time-consuming. For example, this can include reformatting data to allocation spreadsheets. Every bit of work takes time away from other accounting tasks. The key phrase when thinking about this is, “Even though the current process works, it doesn’t mean we can’t do it better.” Stepping back to see if an organization can integrate its data into its general ledger platform can help save time, reduce errors, and streamline reconciliations. Not all platforms will integrate, but finding ways to make data sync better can be an immense efficiency gain. For example, it can include inputting account codes into the Salesforce or Raiser’s Edge customer relationship management instance in order for the development gifts to be pre-coded based on the category chosen.
Automation
Most nonprofits operate their close out of an Excel checklist. These can be cumbersome and—at the end of the day—are only good if people use them to actually track all tasks involved in the close. These spreadsheets also require additional reconciliations to make sure all the work is done. As part of any digital transformation project, an organization might evaluate the use of a tool that can help not only document the close process but also the reconciliations and the accounting processes. Using an automation tool can give a CFO insight at a moment’s notice as to the status of reporting. It also can allot/apportion significant time for accounting staff to analyze data and unlock their true potential, rather than spending time entering the data. The benefits of these tools are enormous, but one of the most significant advantages is the availability of real-time data for key stakeholders to use in their decision-making process as they fulfill a nonprofit’s mission.
The methods examined here are just some of the ways an accounting department can improve its close process and help decision makers increase the timeliness in which they can receive the monthly reporting package. Taking a step back to analyze the day-to-day processes of the accounting team to help create efficiencies and innovative processes can go a long way and potentially save countless hours in the long run.
If you have any questions or need assistance, please reach out to one of our professionals.