Category

Accounting

Nov 29
0

Converting from INFR to GAAP: Considerations

By | Accounting, Nonprofit | No Comments
person using computer at desk

One unusual question that may arise is when a client wishes to change from INFR (international financial reporting) standards to the GAAP (generally accepted accounting principles) standards. Most of the available literature covers the opposite: GAAP to INFR.

Currently, there is no authoritative standard to refer to when changing from INFR to GAAP. Financial Standards Accounting Board FASB ASC 250 provides guidance solely for reporting accounting changes within the same basis, not for moving from one basis to another. However, we can refer to several nonauthoritative sources and draw inferences to guide the transition.

INFR: Not a Special Purpose Framework

A publication by the AICPA’s Center for Plain English Accounting (CPEA), “Common Questions About Special Purpose Frameworks” points out that IFRS does not constitute a “special purpose framework.” Why is this important? Because nonauthoritative guidance for special purpose frameworks does exist. The AICPA designated the International Accounting Standards Board (IASB) as the body to establish professional standards, including those pertaining to international financial accounting and reporting principles. Because of this, INFR may be considered generally accepted accounting principles. Most literature refers to changes within the same accounting basis, not moving from one basis to another.

Suggestions to Make the Standards Switch

So, if there are no authoritative guidelines, and the nonauthoritative guidelines aren’t clear, then what? Deloitte published a paper in 2020 attempting to address this issue as well. First-time adoption of GAAP after using INFR is a bit more complex than converting INFR to GAAP, but it can be done.

Deloitte’s authors suggest the following:

  • Organizations should review all historic transactions since their inception to determine whether the accounting for such transactions would have been different had U.S. GAAP been applied. If that sounds tricky it’s because it is. For example, you’ll need to consider all historic business combinations and whether there should be any amounts (goodwill, fair value adjustments to long-lived assets) that should be included in the opening balance sheet.
  • Companies moving from INFR to GAAP usually complete a full retrospective application. One of the key principles of IFRS 1 is to apply retrospectively all standards effective as of the reporting date of the entity’s first IFRS financial statements (with some exceptions and exemptions). However, U.S. GAAP requires the application of the standard effective as of the transaction date and apply new or changes in accounting policies in accordance with the respective transition requirements of each standard.

What if your company has a very long history? Long-established companies converting to GAAP may need to refer to the previous accounting hierarchy and original pronouncements to determine the appropriate accounting for a particular transaction.

Disclosing Such a Change

For successor auditors, the question arises as to how to report such a change. Such changes should be reported as a “change in accounting standards” or “change in accounting basis” (not change in accounting) within reports. This makes it clear what has changed. Successor auditors would be wise to proceed with caution if inheriting such a situation and carefully consider all options. The lack of authoritative guidelines makes it challenging, but not impossible. Reading between the lines, making decisions that err on the side of transparency and full disclosure, and common sense can go a long way towards making statements clear.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Oct 17
0

Strategies to Address the Accounting Talent Shortage

By | Accounting, CPA | No Comments
person at laptop computer using accounting software

Although accounting remains a popular undergraduate major, there is a growing shortage of talented accountants in the profession—and especially of CPAs. According to the Society of Human Resource Management (SHRM), over 300,000 accountants left their jobs in 2022, a decline of 17% from a peak in 2019. And while Baby Boomers are retiring in droves, it’s not the only reason for the career exodus; an almost equal number of mid-career professionals and younger generations are also leaving the profession.

This gap has not remained unnoticed. Several industry-leading groups, including the National Pipeline Advisory Group, are exploring solutions to the accounting talent and CPA gap. And while there’s no magic wand to fix the lack of CPAs in the near-term future, there are many strategies that may provide an answer.

Strategy 1: Personal Outreach

It’s old-fashioned but effective: the direct, personal approach. Members of the National Pipeline Advisory Group, as reported in the Journal of Accountancy, are taking a direct approach to encouraging young and mid-career professionals to become CPAs. The direct approach includes speaking to people at conferences and events, joining local organizations and attending meetings, and simply speaking to people who are talented at what they do, enjoy accounting, and may be interested in becoming CPAs.

It may seem obvious that a good career step for an accountant is to obtain their CPA license, but sometimes, people just need a little inspiration. That’s where the direct approach comes into play. Having someone mention it may be just the thing someone needs to explore their next career move. It can’t hurt, and it certainly leads to many industry connections, which benefit everyone in the conversation.

Strategy 2:  Remove Obstacles to the CPA License

As with any professional accreditation, the CPA exam requires an intensive amount of study and preparation. Some suggest changing the 150-hour post-graduate study requirement, for example, which adds approximately one year onto the bachelor’s degree. Perhaps other means of achieving the same high level of education and professional expertise can be explored so that more people can pursue the CPA path. Removing limitations without compromising integrity or quality may be an important path to increasing the number of CPAs.

Strategy 3: Augment with Technology

Technology cannot replace an accountant or CPA. No matter how good the platform, program, or system, it cannot and should not be used as a substitute for qualified accounting advice.

That said, technology can augment your existing accounting staff and improve efficiency by taking repetitive tasks off the plate of your current team. For example, automating legal disclaimers or routing emails that must be sent to clients can save up to an hour per day from a busy company’s time, freeing that time up for more advanced tasks. Other automations such as sending reminder invoices to clients for past due invoices, routing approvals automatically, and running reports can all be done by technology and save time for more advanced tasks for your current staff.

CPAs Matter to All Organizations

CPAs perform vital and irreplaceable functions for organizations of all sizes, including nonprofits. Students view the accounting profession favorably, citing ample job opportunities and room for career growth and interesting career paths as reasons they chose to enter the profession.

However, something is stopping these bright young minds from acquiring the advanced education to become CPAs. If we can work together within the profession to explore why this is occurring and remove potential barriers, we may be able to solve this crisis together.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Sep 19
0

AI: A Powerful Tool for Nonprofit Accounting Needs

By | Accounting, Nonprofit | No Comments
person using a tablet in front of an open laptop computer. tech overlay

The introduction of ChatGPT, Bing’s artificial intelligence (AI) powered search engine assistant, set the world abuzz last November. Since then, countless articles, talk shows, and more have discussed, dissected, and analyzed the use of AI in the business world.

AI isn’t new. You’ve probably encountered it before and assumed it was part of a website. Have you ever used a website’s chatbot function to answer a simple question? If so, you’ve likely used AI. Or perhaps you’ve tapped the “design help” function in PowerPoint to help spruce up your presentation. That’s also a great example of AI in action.

AI can assist the average nonprofit in many ways. One way in which AI offers powerful time-saving features is in the accounting department. Here, we’ll unpack why and how AI is a powerful tool for nonprofit accounting needs. Then, if you’re interested in exploring this topic further, reach out to us and we can discuss how AI can be used to automate and improve processes in your nonprofit accounting team.

Why Use AI for Process Automation?

Consider how much time is spent on routine tasks each week: emailing reminders to employees to enter their hours or submitting expense reports, for example, or emailing common forms and paperwork to constituents. Even something as simple as sending a participant quiz to those who have taken a webinar with your organization can take over an hour, depending on how much or little it is automated.

AI is an excellent tool for repetitive, rule-bound tasks. You can automate tasks, workflows, reports, and reminders using AI in your accounting department. A quick estimate of the time saved through automating these tasks is eye-opening. With that time saved, you can focus on more pressing needs requiring creativity and expertise. Let the AI batch and send expense report reminders while you strategize with the program team on their accounting needs; it is time well saved and better spent with your teams.

Improved Data, Analytics, and Forecasting

Another area in which AI greatly helps with accounting and financial needs is in data, analytics, and forecasting. Because AI can analyze vast amounts of data rapidly, it can provide insights into constituents’ needs, program demands, and operational performance. With rapid information at your fingertips, you can make better decisions.

Not All AI Is Created Equal

Now comes the hard part. How do you select the right platforms that have AI enhancements without choosing something that will be obsolete tomorrow?

The key is finding the right consultant to assist you in the process. You need someone well-versed in accounting and financial needs for nonprofits who also understands the software world.

Choose from among vendors with time-tested platforms. Sage Intacct, for example, is used worldwide by over 11,000 for-profit and nonprofit companies. It is a well-known accounting and finance platform that includes many time-saving automations. MIP Fund Accounting is another platform that can be deployed on-premises or in the cloud that offers many time-saving automation for payroll, HR, accounting, and more.

Ultimately, the choice of the right nonprofit accounting and finance software is a decision that may take some time. Most software companies include AI-powered automation in their products, especially as consumer interest and acceptance of using the tool to save time has grown. There is no better use of AI than to automate manual processes, thus freeing up accounting professionals for more creative and challenging tasks.

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.

Sep 12
0

Reduce Spreadsheet Use and Improve Productivity with the Right Accounting Software

By | Accounting, Accounting Software, Nonprofit | No Comments
person in office at desk with laptop, calculator, and phone with clipboard in hand.

Despite the apparent drawbacks, many organizations continue to rely on spreadsheets for their accounting needs. Spreadsheets are cumbersome to interlink, for example, making it necessary to manually rekey data to produce graphs, charts, and reports using data from two or more spreadsheet-based sources. One error accidentally introduced into a single formula can throw off the entire total and give a false picture of the data. And let’s not forget the time it takes for data entry, formula lookup, and formula entry.

It’s easy to understand why many organizations still use spreadsheets. They’re familiar and bundled into office productivity suites, so the cost is minimal. Also, they can be used by anyone with rudimentary computer skills.

However, given the numerous drawbacks of continuing with spreadsheets and the many benefits of shifting accounting into a modern, computerized system, it makes sense to move to accounting and financial management software for your organization’s accounting needs.

Five Benefits of Moving from Spreadsheets to Software

Every organization can reap enormous benefits from moving away from spreadsheet use and tapping into the power of cloud-based accounting and finance platforms. Five benefits almost all companies experience include:

  1. Greater efficiencies: Every accounting function is easier in an accounting software system. Accounting software enables you to enter checks efficiently and quickly into a digital check register, confirm payment receipts and expenses, and track them against specific accounts. Reports can be run with the click of a button: balance sheet, cash flow statement, unpaid receivables, income statements, and more. Additionally, some software comes with the ability to generate charts and graphs. What used to take you hours will take mere minutes with the right software. Additionally, advances in the use of artificial intelligence (AI) enable workflow automation that saves additional time.
  2. Improved clarity: Spreadsheets make viewing progress towards goals across multiple programs or funding lines difficult. With an accounting program, you can access numerous metrics and track them more easily against Key Performance Indicators (KPIs) and other goals.
  3. Faster and easier reconciliation: If it takes forever to reconcile banking and credit card statements at the end of each period, you’ll find it much easier and faster to do so in a computer program. Both processes are more efficient and make it easy to spot discrepancies in the reconciliation.
  4. Enhanced forecasting: Manual forecasting that relies upon spreadsheets is time-consuming and error prone. Using accounting and financial management software enables more accurate forecasting. It also makes it possible to extend forecasting timelines, which is nearly impossible with spreadsheets.
  5. Time saved: Software enables you to complete tasks in minutes what used to take hours. Reducing spreadsheet reliance immediately saves hours per week that can be spent on other tasks such as budgeting, consulting with program managers on their financial and accounting needs, and more.

Accounting and Financial Software for Modern Nonprofits

Many accounting and financial software packages are on the market today, some explicitly geared to nonprofits. It is recommended that nonprofits avoid “off the shelf” business accounting software packages. Many of these lack the functionality nonprofits need to track revenue and expenses against program lines, for example.

Sage Intacct is a cloud-based accounting and financial software package created specifically for nonprofit organizations. Over 11,000 for-profit and nonprofit companies worldwide use it. It enables fast, accurate accounting, enhanced visibility into KPIs and forecasting, and excellent reporting. Perhaps most importantly, it automates workflows, making it a time saver for a busy accounting department.

There are many more accounting software choices available, and it can be confusing to review and compare them. Working with a consultant who understands nonprofit organizations’ unique needs and challenges is the best way to select the right accounting and financial software package for your needs.

Moving from spreadsheets to software is essential for nonprofits. While it may be tempting to continue using spreadsheets to save money, the time saved by transitioning to an accounting and financial software system is priceless. It’s time saved that can be put towards achieving your mission—and isn’t that worth it?

Welter Consulting

Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact us for more information.