Category

Accounting

Jun 06
0

New Law Raises DOL Minimum Salary Threshold for Overtime Pay – Are You Ready?

By | Accounting, Budget, Government, Nonprofit, Overtime | No Comments
binders labeled salary and overtime, with printout, calculator, and magnifying glass, Minimum Salary Threshold for Overtime Pay

Salaried employees are typically exempt from overtime, but a new law from the U.S. Department of Labor slated to become effective on July 1, 2024, may change that for up to one million people. What is this law and how might it impact your business? We’ll look at the law, what it means for the average business, and what you need to do now to prepare for it when it becomes effective.

What Is the DOL Minimum Salary Threshold Raise?

The DOL released a final rule on April 23, 2024, which raises the minimum salary threshold for the standard exemption applied to executive, administrative, professional, and outside sales employees, as well as certain computer employees, exempting them from minimum wage and overtime protections under the Fair Labor Standards Act (FLSA). These exemptions are typically called “white collar” exemptions meaning that so-called white-collar jobs—usually salaried office jobs—do not normally qualify for overtime. The new law may change some of that.

FLSA covers organizations with two or more employees earning $500,000 or more in annual sales. It also includes education institutions and hospitals caring for the sick, mentally ill, or elderly. If your organization falls into these categories, you must adhere to the overtime laws and the new rollout of the minimum salary threshold increase.

What Are the New Salary Thresholds?

The threshold for the EAP exemption’s minimum salary will increase to $844 per week (approximately $43,888 per year) from its current level of $684 per week (approximately $35,568 per year) on July 1, 2024, and then to $1,128 per week (approximately $58,656 per year) on Jan. 1, 2025

The second increase marks the threshold nearly $3,600 more than the previous Department of Labor proposed overtime rule back in 2023. Increases for highly compensated employees’ (HCE) salary are also more than originally proposed.

The new minimum annual compensation threshold for Highly Compensated Employees increases to $132,964 on July 1, 2024, and then to $151,164 on Jan. 1, 2025

How Can Your Organization Prepare for the Change?

Now is the time to take steps to prepare for the new law to take effect. While several states have filed lawsuits to block the law from going into effect, it is uncertain whether this will happen. You should proceed as if the law will indeed be effective on July 1, 2024, and plan accordingly.

First, consider your options. You can adjust an employee’s salary or reclassify them as nonexempt. However, changing classification from exempt to nonexempt may create additional considerations such as how compensation and bonuses impact overtime pay owed to a reclassified employee.

Additionally, changing employees from exempt to nonexempt increases your record-keeping responsibilities. Do you have the right nonprofit accounting software to handle this step? If not, is it time to upgrade or seek new software?

Consider also how reclassifying employees may impact your budget and employee morale. From a budgetary standpoint, you may incur higher overtime expenses, which can strain money you may have set aside to pay bonuses. From an employee morale perspective, benefits tied to compensation may change. Some employees may view the change as a demotion. You may need to think through how you will roll this out. Speak with your accounting and human resources team and consider all options.

Another area of consideration is around workplace policies, such as travel, or equipment use. If you currently restrict nonexempt workers from travel or from using equipment while traveling, you may need to revise your policies if you choose to reclassify people from exempt to nonexempt.

Work with Your Accounting Consultant 

There are many, many considerations when this law goes into effect. Each organization is different, with complex needs and considerations. For our current clients, we encourage you to speak with our team to determine the wisest course of action with minimal disruption to your organization and its finances while fully complying with the law.

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.

May 14
0

Planning for the Successful Transition to New Accounting Software

By | Accounting, Accounting Software, Nonprofit | No Comments
person using accounting software on laptop and mobile phone

Perhaps your organization has outgrown spreadsheets or off-the-shelf small business accounting software. Now, it’s time to find government fund accounting or nonprofit fund accounting software. The platform of your dreams has all the bells and whistles you’ve hoped for: great budgeting features, invoicing and automation, and super reports.

As you prepare for the implementation of your new accounting solution, there are several steps you can take to prepare your data and your team for the transition to the new platform. With these steps, you’re more likely to have a successful transition to your brand-new accounting software.

Clean Your Data

The data that’s currently in your system, whether you’re using spreadsheets or a small business accounting program, will move into the new system to get it started. If there are mistakes or errors in your current system, now is the time to correct them.

Cleaning data refers to the process of identifying and correcting errors, inconsistencies, and inaccuracies in a dataset to ensure its accuracy, completeness, and reliability for analysis or other purposes. This process involves several steps, including identifying errors, handling missing data, removing duplicates, and standardizing data. Additional steps may be resolving inconsistencies and developing what is called a “data dictionary” or a standard guide to data inputs.

Consider your donations for the past year, for example. Perhaps you input donor names and addresses into a database, spreadsheet, or your old business accounting program, and now you want to move it into your new accounting database. Checking to make sure there are no duplicates is a smart idea. Duplicates may not be exact matches, so you may need to work with your team to generate lists and manually check them. (For very large data files, there are companies that specialize in data cleanup.) Common places where duplicates creep into files include:

  • Addresses where road, street, or avenue are spelled out—and a second address where it is abbreviated. You’ll need to decide what the standard for your organization will be—the postal abbreviation or spelling out the full word.
  • Names where a first initial is used (J. Smith), fully spelled out (John Smith), or includes a middle initial (John A. Smith). You’ll have to decide which John Smith version to keep.

These are just two examples of some very common areas where duplicate records can occur. Other places to clean up before exporting your data to move it into the new system include reconciling bank accounts and credit cards, updating A/P and A/R, and ensuring other financial information is updated and accurate.

Document Procedures and Workflows

The accounting and finance team should document common processes, procedures, and workflows. This is important because your new accounting platform may include ways to automate steps in the workflow. It is also a good time to dust off any procedures you have already written out and update them if necessary.

Some examples include:

Donation Processing Workflow

  • Receiving donations via various channels (online, mail, in-person).
  • Recording donor information and donation details.
  • Issuing donation receipts or acknowledgments.
  • Allocating donations to specific programs or funds (if applicable).
  • Reconciling donation records with bank deposits.

Program Expense Allocation Workflow

  • Allocating expenses to specific programs or projects.
  • Tracking program-related expenses separately from administrative and fundraising expenses.
  • Ensuring expenses are allocated in accordance with donor restrictions (if any).
  • Reporting on program expenses to stakeholders, including donors and grantors.

Other common nonprofit workflows include grant fund management, compliance reports, and general financial reporting.

By documenting frequently used workflows on paper, you’ll be in a much better position to understand how the same process works in your new accounting platform. Working with your software vendor or consultant, you can set up the workflows, ensure the reports you need are ready, and be better prepared for the new software.

Work with a Skilled Nonprofit Accounting Consultant When Installing New Accounting Software

It’s vital to get your new accounting software set up, and the data moved into it correctly. This is an area where having a skilled and experienced nonprofit accounting software consultant is vital. With the right consultant by your side, the transition to your new platform will be smoother and easier. You’ll be up and running in no time, with the right automations in place for maximum efficiency so you can better manage margin to support your mission.

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.

May 07
0

How CFOs Are Utilizing Machine Learning

By | Accounting, Nonprofit | No Comments
CFO using computer, showing AI on monitors

You can’t open a professional journal, website, or news site these days without seeing articles about artificial intelligence (AI). AI, in all its many forms, offers exciting potential to many professions, including accounting. Machine learning is one branch of the overall AI “tree” that continues to expand in many directions, including Generative AI, machine learning, natural language processing, and more. In this article, we’ll help you better understand machine learning and share examples of how CFOs are tapping into the potential of this new technology.

What Is Machine Learning?

Machine learning is a branch of artificial intelligence (AI) that involves the development of algorithms and statistical models that enable computers to progressively improve their performance on a specific task through experience or data. Instead of being explicitly programmed to carry out a certain task, machine learning algorithms learn from patterns in data, allowing them to make predictions or decisions without being explicitly programmed for every scenario. Machine learning techniques are widely used in various fields such as image and speech recognition, natural language processing, medical diagnosis, financial forecasting, and many others.

Machine learning works best when there are predictable, stable patterns and large amounts of data the system can tap into for learning. Consider grammar-checking software. It is a form of machine learning software that ingests copious amounts of data (previous texts and the rules of English grammar) and checks your writing for errors. Does it make mistakes? Yes, since it may not recognize specific elements of style unique to your writing that skirt the rules of English grammar or that the context of a sentence calls for something a bit different than the norm. However, it is a useful bit of machine learning and one that we now take for granted in our word-processing programs.

Machine Learning in Accounting

Many accounting platforms have machine learning built into the system to help accountants and financial professionals do more with their data. A few machine learning examples from the world of finance and accounting include:

  • Forecasting: Machine learning programs can leverage both historic data as well as current market predictions to improve forecasting. Better forecasting offers companies smarter money management, for example, or better inventory management if they can forecast supply and demand with greater accuracy.
  • Fraud Detection: Manually reviewing accounts payable or receivable line by line is a thing of the past with new fraud detection tools. Because machine learning systems are good at pattern recognition, anything outside of an expected pattern can be brought to the user’s attention. These fraud detection features save many hours of tedious journal reviews and allow users to spot patterns with ease.
  • Risk Management: If the system has access to large data sets, it can review past data, identify patterns around known prior risks, and help detect similar risks in the future.
  • Compliance: Machine learning can augment accounting systems and provide notices, reminders, and more on key compliance issues and dates. The resulting reminders can help organizations remain compliant.

Can Machine Learning Take the Place of an Accountant?

Machine learning is, as we said, great at pattern detection. However, what to do once a pattern is detected requires the insights, skills, and experience of a professional accountant. No machine will ever replace a CFO or accountant. Instead, software that uses machine learning can help accountants complete tasks efficiently, improve predictive analytics, and prevent fraud.

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.

Apr 17
0

Expert Tips for Accounting Automation

By | Accounting, Nonprofit | No Comments
person using tablet with accounting software to demonstrate accounting automation

Accounting or finance automation is a term you will see in many places today. Automation does indeed save time and improve efficiency. However, good automation workflows begin with a sound process. Here, we map out the steps to take before you automate your finance processes. If you take the time now to refine your processes before you set up automations, you’ll gain more benefits from automation.

Good Finance Automation Begins with Simple, Effective Processes

Even before discovering which automations are possible in your current finance or accounting software, ask yourself why you want to automate a process. Consider automation when a process:

  • Takes considerable time and effort
  • Reoccurs at regular intervals
  • Follows a logical sequence

Knowing why you want to automate a process starts with such questions. And it’s not just about what you want in your role with the organization—ask what other team members need too. Consider gathering your team and brainstorming ideas around which processes can be automated. Is there one task that takes up a great deal of time for someone? Is it something they must do regularly?

When you have your list of tasks, move on to the next step.

Map the Process on Paper Before Automating Through Software

It is important to map out the process and workflow from start to finish on paper before programming it in your finance system. This ensures that you’ve considered every step and haven’t missed anything. It also gives you time to review the process and make sure it is still accurate and needed. Sometimes, organizations continue to enact processes because “that’s the way it’s always been done.” Forcing yourself to sit down alone or with the team and map it out on paper gives you another opportunity to review the process, make refinements, and reduce the steps, if possible.

List the Processes to Automate in Order of Priority

Next, take the list of processes you’ve created and order them according to priority. Which process, if automated, saves the most time? These should be your priority automations.

Work with the Technology You Have

Now it is time to set up automations. Start with the system that you have. Most finance and accounting systems have at least some form of automation built in. You may need to ask a consultant or find information on the vendor’s website to set up the automations you require.

Do You Need Custom Programming or Replatforming?

What if the current platform you’re using doesn’t offer the automations you need? You have several choices. Exploring custom programming may be a good step if you aren’t ready to replatform or choose new software. While custom programming isn’t cheap, it may be the right solution for your needs if you can quantify the return on investment or ROI.

Some finance platforms offer additional components, upgrades, or add-ons that may provide the tools you need. Work with your technology consultant or software vendor to explore other alternatives. Many companies have invested in automation within their finance or accounting platforms over the past several years, especially as AI has become prevalent. It may be easier for your organization or more cost-effective to upgrade your current platform than to hire someone to build custom code or to switch to a new platform. The last alternative is to move to an entirely different system, also called replatforming. Such a move should not be undertaken lightly. However, if you find that your current accounting and finance software isn’t supporting your organization’s growth or needs, speak with us, and let’s discuss the options.

Automate Processes the Right Way

Automation in your finance and accounting workflow can indeed save a great deal of time and effort. Ensuring that the basic process is sound, identifying the ones that give you the most bang for your buck, and utilizing the software you already have is the right way to proceed with automating financial processes.

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.