A not-for-profit's monthly reports communicate critical information to the organization's management. Sometimes, these readers can be so eager to see the month-end results that they want accountants to by-pass procedures they believe must be performed in order to avoid distributing misleading information. But it is possible to do a ‘soft’ close and speed up completion of the financials without compromising important procedures financial statement users.
Here are a few common problems that cause delayed monthly closings and some suggestions for how to deal with them.
Waiting for bank statements: Recording of revenue and expenses can't be considered complete without reconciling accounting records with the bank, and it's advisable to have the bank reconciliation done before reports are distributed. But do you have to wait for the bank statement to arrive in the mail to reconcile? Not any more! Financial managers should be authorized to read information about all of their organization's bank accounts.
Waiting for invoices from contractors, suppliers and vendors to arrive: You know they're coming, but you don't know how much you owe. Don't worry about any that will have a minimal effect on either the monthly reports or on grant reporting. If the amounts will be too big to ignore, call up the contractor and ask them to email or fax their invoice. You can post estimates to Accrued Expenses using a reversing entry to the GL; then when the bill arrives, post it to accounts payable as you normally would.
Difficulty with a reconciliation: It's good practice to tie out all asset, liability and net asset accounts before you distribute month-end reports, but if you run into trouble, it can really slow you down and make you late with your reports. Consider, though, that if your AP subsidiary ledger is off $50 or your bank reconciliation has an unknown $5.00 transaction, the financial reports will be just as useful before the reconciliations are done as they will afterwards. Weigh the benefits of early reporting against the benefits of absolute accuracy. Ask yourself if the corrections you haven't made will cause the reports’ users to make different decisions than they would make if the information were complete, and if the answer is “Yes", keep working until you can say “No".
Gathering receipts and other back-up for credit card purchases or travel expenses: Frequently, for credit cards carried by employees, receipts and the information you need to record an expense are missing when it's time to pay the bill. In order not to hold up financial statements, post debits for missing charges on employee cards to Employee Receivables so they land on the balance sheet as assets. Think about them as you would cash advances for travel. Once you have the receipts in hand, you can journal-entry them out of Employee Receivables to the appropriate expense account.
Undocumented amounts on cards used for office purchases can be charged to miscellaneous expense until you get the information you need.
Lack of appropriate expense coding to programs or funding sources: Help managers and other employees responsible for coding to accomplish this timely! You can stamp each invoice that arrives with a custom-made stamp (they cost about $20) that has a blank space for the account, program, grant and so on. Another option is to use purchase orders so the coding is required before the purchase is made.
Executive directors’ or other colleagues’ urgent requests for reports or projects at the last minute: We've all experienced this cause of delay. It can be difficult to get everyone what they need without putting in overtime. It helps to be proactive: make sure you know when grant reports are due. At month-end before your time is completely devoted to the closing process, ask your management team about other requests that may be coming in the next week or two. Try to set a common schedule so you are able to meet requests on time without stressing or letting people down.
I hope you can apply at least one of these suggestions to relieve some of the pressure!
Nancy Church, CPA