Running Your Nonprofit’s Accounting Department During COVID-19 and After
A professional accountant discusses how to make your nonprofit’s accounting more virtual.
Three approaches employed by tech-savvy nonprofits for post-pandemic bookkeeping.
When stay-at-home orders hit a year ago, was it a seamless transition for your nonprofit, or was your bookkeeper sneaking into the office early on Saturday mornings to scan documents and do work on your desktop version of Quickbooks?
Your organization may be in the latter category, perhaps because you never expected something like COVID-19 to happen. Or maybe you don’t fully trust the latest technologies, or you held back on automating due to budgetary constraints.
I find myself frequently commenting on how lucky we are that this pandemic didn’t strike in 1997. Technology has come such a long way since then that it really is possible now to run a fully remote accounting department, complete with internal controls. Affordably, too.
Many of us are starting to see what we hope is the light at the end of the tunnel with this pandemic. While no one can really say for certain what the new normal will look like, many nonprofits have voiced their interest in becoming more virtual.
Here are three approaches employed by tech-savvy nonprofits.
Make Your General Ledger Software Accessible in the Cloud
Setting up your ledger to be available in the cloud is crucial. The ledger is the primary tool your bookkeeper or accountant uses to maintain your organization’s finances. Having it available only in the office severely limits this individual’s ability to do their job, which in turn impacts the ability of senior management and the board to make well-informed financial decisions. Whatever accounting software package you are using, chances are there’s an online browser-based version available.
Virtualize Your Accounts Payable
One task that is particularly difficult to manage during a pandemic is paying bills in a traditional manner, especially if you want to effectively segregate duties. Remember those bookkeepers who sneak into the office periodically to do their work? They have to sort through vendor invoices, enter them in the accounting software, and print checks. The executive director then has to slip in another day to sign those checks. Observing social distancing, the board president visits the office on Tuesday night to sign those checks that fall above the dual-signature threshold. What a hassle, right?
These days, there are a variety of mechanisms to automate your accounts payable. One is your bank’s online bill payment service. If you take this route, make sure that the system is set up so that a check signer has to log in to approve disbursements. (Under no circumstance should only one individual be both setting up payments and executing them.) Alternatively, you may want to consider bill payment software that is linked to your general ledger package. Bill.com has been the darling of cloud-literate accountants and bookkeepers for years, but there are various services from which to choose. Whatever system you use, make sure it is set up for separation of duties so that no one person has too much control over the process. Assign roles to each person involved, so that your bookkeeper enters bills, your finance director approves them, and the executive director electronically executes the payments—all from different locations. For added benefit, subscribe to a system that synchronizes with your general ledger accounting system so as to avoid duplicate data entry.
Some bill payment platforms can also serve as a virtual filing cabinet. This gives users easy online access to vendor payment history and invoice backup documentation while working away from the office. And who’s not away from the office these days?
But What About Security and Internal Controls?
As an auditor, nonprofits frequently ask me about internal controls in an electronic environment. I advise them that the same principles apply in the new environment as held in the old. You should think about this from a risk assessment perspective. What could go wrong with the way you have things set up? And how are you going to address that risk?
While I cannot give you an exhaustive list of dos and don’ts, here are some general best practices. For any systems hosted onsite, backup and data security considerations are key. For web-based or web-hosted products, many large-scale providers have frequent backups, bank-level encryption, multifactor authentication, and so on, which means that using the cloud may be safer, in many cases, than housing the data on your office server. But you should not assume this for every provider. Work with your IT professional, do your research, and also ask the providers themselves.
At the client level, access is a huge consideration. It is important to make sure that people have precisely the level of access they need to do their job, and no more.
Lastly, the guidelines included here are meant for informational purposes only. Any organization making changes to its internal controls should involve its finance committee and IT professionals to ensure that due diligence is exercised and that safeguards are established.
About the Author
Douglas Cook (he/him/his) has 19 years of professional accounting experience, primarily working with nonprofit organizations.
Douglas earned his Master of Public Administration (MPA) degree (with an emphasis in Nonprofit Finance) from San Francisco State University, where he conducted award-winning research on nonprofit governance issues. He also holds a B.A. in Business from Dominican University of California and completed a Certificate in Accounting at U.C. Berkeley. He is a member in good standing of the American Institute of Certified Public Accountants (AICPA), the AICPA Not-for-Profit Section and the California Society of Certified Public Accountants.
Douglas has taught Nonprofit Financial Management as part of the Nonprofit Management Certificate Programs at California State University, East Bay and San Francisco State University. He has also taught accounting and auditing to undergraduates and graduates at Golden Gate University.
In addition, he recently started a blog where he discusses various topics relating to nonprofit accounting, financial management and good governance practices.
Articles on Blue Avocado do not provide legal representation or legal advice and should not be used as a substitute for advice or legal counsel. Blue Avocado provides space for the nonprofit sector to express new ideas. Views represented in Blue Avocado do not necessarily express the opinion of the publication or its publisher.
Related Posts
