Jul 27
0

What’s in a Name? The Differences Between Bookkeepers, Accountants, and CFOs

By | Accounting, Nonprofit | No Comments

Almost every nonprofit eventually reaches a point where it needs help with its accounting beyond what the existing team provides. Deciding which positions to add and who to hire can be challenging. Should you hire a bookkeeper? An accountant? Or do you need a Chief Financial Officer (CFO) and additional accounting support staff?

Each person in the accounting team—bookkeeper, accountant, CFO—performs different functions. Let’s discuss what they do, and how you can figure out which one you need to help your nonprofit grow.

person with speech bubbles: cfo? acountant? bookkeeper?

What Do Bookkeepers, Accountants, and CFOs Do?

Think of bookkeepers, accountants, and CFOs like the musicians in a symphony orchestra. Each plays an important role in keeping an organization’s finances humming. Sometimes you need one role, but as your organization grows, you’ll need the full “symphony” to make beautiful financial music.

  • Bookkeepers process daily transactions. They see that the bills are paid, invoices are sent, and the accounts are reconciled. They also process payroll.
  • Accountants provide similar services to bookkeepers, but also prepare financial statements, ensure compliance with GAAP, and help you understand your organization’s financial information.
  • Chief Financial Officers (CFOs) focus on strategy. They provide advice, strategic direction, prepare and explain budgets, work with lenders, and provide overall financial leadership.

Each person plays an important role in your organization’s growth. Choosing the right role to complement the existing team depends on which growing pains you’re experiencing.

Choosing the Right Role for the Organization’s Needs

One way to assess which position is needed is by examining your current pain points. Where is the organization feeling the pinch?

  • Are you struggling to issue invoices, pay bills, and reconcile accounts each month within two weeks of the end-of-month close? If you answered, “Yes,” you probably need a bookkeeper.
  • Do you need help preparing financial statements? Are you struggling to handle tax season because your accounting system isn’t kept up to date? Do you need more in-depth reports but can’t easily generate them? This indicates another accountant on the team might be needed.
  • Is your organization’s president making all financial decisions? Could leadership use senior-level advice and strategy-setting discussions? Are you struggling with budgeting, forecasting, and planning? These are areas that a CFO would support.

Each position plays an integral role on the team. However, sometimes their job functions do cross into a gray area. For example, an accountant may also perform some bookkeeping functions in a small organization. A CFO may also do some accounting, such as preparing financial statements, depending on their complexity and the organization’s needs.

Should You Outsource or Hire Someone?

This is a great question, and one that you should consider carefully. Many organizations assume that all accounting functions should be handled by a full-time person. However, in a rapidly growing organization, it may make sense to outsource one or more roles. Many nonprofits, for example, outsource some of the strategic accounting decisions to consultants like Welter Consulting. We can bridge the skills gap and provide guidance in many matters.

Others hire a fractional CFO to help build a strategy while their full-time staff handles basic daily accounting. A fractional is a part-time, independent contractor typically hired for their deep industry experience. They work for specified hours each month or on designated projects, adding high-level skills and clarity to the organization without the expense of a full-time hire.

Another way organizations outsource some of their accounting functions is by using a third-party payroll processing firm. As the name suggests, such companies handle payroll and related tasks such as payroll taxes. Any combination of full-time, part-time, and outsourced help may be appropriate. It really depends on your needs, budget, and preferences.

You Have Choices

The good news is that you have many choices. You can hire either part-time or full-time staff or hire a fractional contractor or a consultant. Or you can find an external firm to augment internal resources. By understanding the differences among these positions and how each serves an organization best, you can make better choices on how to improve your accounting and finance areas.

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.

Jun 29
0

Preparing for a Retirement Plan Audit (It’s Not as Bad as It Sounds)

By | Accounting, Audit, Nonprofit | No Comments

The word “audit” generally has unpleasant connotations, but frankly, nonprofits should be used to the term by now! Most nonprofits work with independent auditing firms to ensure compliance with accounting and other rules, and third-party audits build trust with donors. Other audits may be conducted, for example, by the state employment commission to ensure compliance with workers’ compensation laws and payments. Each of these audits focuses on a different aspect of your business, and none of them indicate something is wrong – they are just part of doing business as a nonprofit organization.

There’s another type of audit you may not be as familiar with, especially if your organization is small: a 401K or retirement plan audit. The Department of Labor (DOL) requires organizations to file an annual Form 5500, which reports on the plan’s financial condition.

blurred image of keyboard with crowd of people with an overlay of the word audit and symbols to support the idea

Plan sponsors with fewer than 120 employees participating in the program at the start of the year can file a short Form 5500 and generally do not require an audit. However, once your organization has 121 employees participating in the retirement plan at the start of the year, the longer form must be used, and this automatically triggers an audit.

Who Conducts the Audit and When Is It Due??

If your organization must conduct an audit, you are responsible for hiring an independent accountant or accounting firm to complete the retirement plan audit. Form 5500 is due on the last day of the seventh month of the plan year. The plan sponsor may file for an extension if necessary.

Who Participates in the Audit and What Do They Do?

Generally, the plan administrator or sponsor, recordkeeper, and custodian all participate. Each must provide all required records and answer questions. The investment advisor should also attend, as this professional’s guidance directly impacts the fund. Lastly, the auditor will, of course, lead the audit and work with all participants to gather and analyze the necessary plan records.

How Audits Unfold

A thorough audit can take several months, so it’s best to contact the independent accountant several months before the actual audit is due. The auditor provides a list of documents necessary for the audit, and the plan sponsor and other participants gather and send the documents to the auditor. The auditor then reviews the documents. They may have questions or need clarification on certain items. After they complete their review, they prepare financial statements and the final audit report.

Documents Needed

Many documents are needed to successfully complete a retirement plan audit. These include, but are not limited to:

  • Current IRS letter
  • All plan documents
  • 401K administrative meeting minutes
  • Rollover, distribution, and loan reports that detail transactions by participants
  • Participant Account Summaries
  • Statements of Net Assets Available for Benefits and Statement of Changes to Net Assets Available for Benefits 
  • Draft Form 5500
  • IRC Compliance Testing Results
  • An employee census with details of the plan participants

A second set of documents may be requested. This includes a sample of the employee participants and may require Form I-9, detailed payroll and reporting records or stubs, termination records, and requests for transactions.

Once the audit is complete, you will receive the report and documentation needed to complete your filing.

Audits, Just Part of Running a Nonprofit

Audits can require significant time and effort to gather the necessary documents, but they provide a valuable service. Not only will your audit report help ensure compliance with retirement plan requirements, but the detailed findings and report can be a valuable tool for improvement. With the right approach and planning, your retirement plan audit can go smoothly and will become just another annual milestone for your growing nonprofit.

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.

Jun 26
0

Use Scenario Planning to Build a Strong, Healthy Budget

By | Accounting, Budget, Nonprofit | No Comments

We’re in a period of volatile federal funding and delayed reimbursements right now. The current administration’s push to tighten purse strings and cut waste and fraud has led to a slowdown in available funds, some of which nonprofits rely upon for their work. Add to this the rising costs of everything, inflation, and the decline in donor giving, and you’ve got many organizations feeling nervous about their financial future.

Instead of feeling nervous, feel prepared and ready to face the future with a strong budget forecast that takes these factors into account. Forecasting is the bedrock upon which solid nonprofit organizations are built. How do you accomplish this? With scenario planning. By using what-if scenarios, you can build budget forecasts that take into consideration the most likely situations your organization can encounter.

people in office using scenario planning

What Is Scenario Planning?

Scenario planning goes by many names: worst-case scenario, tabletop exercises, and what-if planning. All of this means using an imaginary, possible situation to think through your organization’s response. When it comes to budgeting, consider the most likely situations, and build your what-if scenarios against them.

For example, an education nonprofit may face the following what-if scenarios:

What if …

  • Our largest donor decides to give his money elsewhere?
  • The grants that cover our programs are not funded next year?
  • The large contract we have with the state is rebid, and we lose the RFP?

Other scenarios are possible, so brainstorm them with your team to identify the most likely your nonprofit may face. Perhaps it’s staff attrition or the need to move your operation to a new location. These and other scenarios all significantly impact budgeting and should be addressed as part of your what-if scenario budgeting.

For each of these scenarios, building a budget in response to “it happens” will help you anticipate and prepare for the worst-case scenario. If it doesn’t happen, you’ll have a rock-solid budget. If it does happen, you’ll be prepared and know what to do.

Budgeting Strategies to Address Uncertainty

Uncertainty is always with us. Smart budgeting strategies can make you feel more confident about navigating the future and what it holds for your organization.

Spend Less

It’s obvious, but something many organizations are reluctant to do is spend less. See where you can cut expenses. Ask managers to review their department budgets and find ways to reduce expenses. Even small efforts add up to a stronger financial position over time.

Adjust Staffing Levels

Some organizations find that they must adjust staffing levels to improve their financial health. Budgeting for the future may involve adjusting staffing levels, such as a temporary moratorium on adding new positions, or deciding not to fill vacancies if someone voluntarily leaves.

Shift Fundraising Efforts

Many organizations shift fundraising efforts to broaden visibility and donor engagement. Look for ways to move from uncertain funding to more certain opportunities, such as finding additional donors if your organization relies on one or two large donors, grants, or foundations.

Use Technology to Improve Forecasting

Nonprofit organizations can also tap into their existing technology to improve forecasting or look to new nonprofit accounting systems for better forecasting support. Integrating your donor relations (CRM) platform with your nonprofit accounting system ensures that data flows between the two systems, reducing manual errors and saving you time.

Many nonprofit accounting systems, such as Sage Intacct, offer AI-enabled shortcuts and time savers within the platform. You might not need to invest in new software. Explore how to get more from your existing platform.

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.

Jun 24
0

Encouraging Diversity in the Accounting Profession

By | Accounting, Corporate Culture, Nonprofit | No Comments

For several years, we’ve written about the current and expected shortage of senior-level accounting professionals. This accounting employment crisis may get worse before it gets better, especially for nonprofits seeking to attract and retain top talent. And, while we have talked about neurodiversity and how to accommodate neurodiverse individuals, we haven’t talked about the elephant in the room everyone is tiptoeing around: the lack of diversity in the accounting profession.

Try it. Ask several people to tell you what they think an accountant looks like. Chances are good it’s a middle-aged white man in a gray suit seated behind a desk. He’s Mr. Bland or Mr. Everyman.

diverse group of people working together

But he’s not really Mr. Everyman, is he? He represents just a small fraction of the rich diversity of people on this planet: the black, the white, the brown-skinned, and others. And of course, he represents only 50% of people, since there are many amazing female accountants as well. I’m one of them.

Unfortunately, diversity and inclusion in the accounting profession is lacking. And, until we examine what causes it, and take conscious steps to fix it, we’re going to keep finding Mr. Bland behind the desk…covering six jobs, because there won’t be enough accountants to fill the vacancies.

The Accounting Profession’s Talent Shortage

The AICPA 2025 trends report found that there was a 12.4% increase in the number of accounting students; however, the year before, there was a 6.6% decline in graduates compared to prior years. This suggests that some progress has been made to increase the number of newcomers to the profession, but we still have work to do.

What more should we do? Should we go to college and career nights, handing out flyers and extolling the glories of debits and credits?

Although that could be fun (and just might convince one or two people to give the accounting major a second look), colleges typically spend time and effort recruiting for “hot” careers and majors. STEM careers get a lot of attention, but accounting is often included among business school majors and is not pushed as much as other mathematics-based professions.

Hidden Biases Keeping People Out

However, no amount of college night guest speakers will encourage people to enter the profession if they don’t feel welcome. Diversity and equity programs are winding down, often to the detriment of hiring practices. Many people feel that accounting is a profession dominated by white males (Mr. Bland, anyone?). It’s a hidden bias that can keep many talented young people from declaring an accounting major and progressing in a field that rewards talent and hard work.

Inclusion goes beyond the college experience. CPA Journal reports that students often felt corporate internship experiences were uncomfortable due to the lack of diversity among other corporate accountants. Feeling out of place, like you don’t belong, is often the motivation to change jobs or professions. The more people feel included and valued, the more likely they are to remain and contribute.

The Way Forward

I don’t have a magic wand to fix the accounting profession, although sometimes I wish I did. Instead, I’d like to offer a few words of encouragement to students considering a career in accounting.

First, this is a stable career. AI is offering great efficiencies, but a smart accountant must be behind the keyboard working with AI to get things done the right way. There will always be room for newcomers to this profession, with a good career path forward, advancement opportunities, and significant income potential.

Next, we need to consider diversity and inclusion in your hiring practices. Yes, DEI mandates were sunsetted by the current administration. That doesn’t mean you can’t encourage your hiring managers to be inclusive and seek candidates with diverse backgrounds and experience. It’s up to you, as leaders of your organizations, to speak to your HR department if you don’t see that happening and encourage them to include more diverse candidates in the hiring pool.

Build a truly inclusive culture at your organization. Provide visible role models for newcomers to the profession. Be welcoming, not just with words, but also with your actions.

We may not be able to solve the national talent shortage, but we can solve cultural problems within our own organizations. By helping people feel welcome, giving them a place at the table, and encouraging them to use their gifts, we can improve retention rates and make a dent in the accounting talent shortage.

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.