Setting up an Accounting Dept– Some Pointers

 

Many growing for profit and nonprofit organizations find themselves with financial reports that make no sense, “forgotten” revenues and slow bill paying processes. They may be at a point where the part-time bookkeeper is over his or her head and flooded in work. So, what can you do? Below are some ideas to get you going.

Identify accounting tasks

You can look at accounting tasks and divide the work within these tasks. For example, a typical accounting department performs the following work:

  • Pay bills – Accounts Payable
  • Recognize revenues – Accounts Receivable
  • Process payroll – Payroll Administrator

Other tasks associated with an accounting department are: Cash management, bank reconciliations, budgets, financial reporting, and taxes. In large businesses, each of these functions is performed by one individual or more. In smaller firms, tasks are shared and the staff is supervised by a manager or a controller, who often is responsible for financial policies and procedures for the organization.

Analyze functions

Many businesses, including nonprofits, organize their accounting department using flowcharts and job descriptions. You don’t want to have the same task be performed twice or three times, but also,  you don’t want to miss an important process. Some nonprofits hire outside consultants to help them in organizing their department for maximum efficiency, while considering risks and controls. Unfortunately, this last option is usually used after a fraud or loss situation, when people are traumatized and willing to pay for professional advice.

Hire people with proper accounting skills

A common mistake is to assume that accounting is easy and can be done by the person who is a receptionist or works in another part of the organization. Without training or education, this person should be able to perform accounting functions of a full-charge bookkeeper. That’s a mistake and is not fair. Hire accounting people who have the proper education and experience. Accounting managers or controllers should have at least a bachelors’ degree in accounting. Someone with a four-year degree in business and a few years of accounting experience may also qualify.

Segregation of duties

As you organize the department, consider segregation of duties. For example, the person who opens the mail or receives money should NOT be the person who books revenues in the accounting system. If the person running accounts payable is also doing bank reconciliations, then a manager or controller should review the reconciliation and look at cashed checks. Why?  To have check-and-balances, internal controls, to prevent and correct mistakes or misappropriations.

Background checks 

Don’t forget to run background checks on all employees and volunteers dealing with accounting and cash functions. Make this a policy within your organization, so that people understand the situation as one of internal controls, not just paranoia.  Actually, many insurance companies require this step before issuing policies against theft and fraud.

Interested on CPE credits regarding nonprofits?  Online Practical CPE Courses

You can also check out my books:

Nonprofit Finance: A Practical Guide — Nominated for a  2016 McAdam Book Award

15 Quick Tips on Becoming a Great Consultant  — Free on Kindle Unlimited

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s