‘Less is More’ When It Comes To Your Chart Of Accounts, Fund List & Program Structure
About a year ago, my family exchanged big city living for a quieter life in rural America – Columbus to Zanesville, Ohio, to be exact. As you might expect, our family encountered quite a few changes along the way.
One thing we learned to appreciate relatively quickly was the simplicity that comes with living in rural Ohio. Back in Columbus, for example, it wasn’t uncommon to have too much “noise” in our everyday lives to be able to step back and realize what was truly happening around us. These days, the noise is no longer too much to handle. Instead, we have truly embraced the “less is more” mentality our new lifestyle has given us.
This same lesson can be incorporated into many different aspects of our daily lives – personal and professional. Keep reading to discover how the “less is more” mantra can be applied to your nonprofit’s accounting function.
Listen to episode 190, “What Should You Do When Joining A Nonprofit Board?, featuring Laura MacDonald, principal and founder of The Benefactor Group, on Rea’s award-winning podcast, unsuitable on Rea Radio.
‘Less Is More’ In Nonprofit Accounting
Are you tracking too much information through your organization’s chart of accounts? Do you have too many giving funds? Have you segmented into too many programs? Too much accounting information can actually hinder your ability to see the important financial aspects of your organization, resulting in inefficiency and ineffectiveness.
One of the joys of working within the audit space is having the opportunity to have some really great conversations with nonprofit leaders about their organizations. I’ve recently been working with a few clients who are seeking to simplify the maintenance and presentation of their financial information by reducing the number of accounts, funds, and/or programs they maintain in their accounting system to gain more clarity and efficiency in the accounting process. This, in turn, will impact the overall structure and level of detail they can provide to the individuals who actually utilize their financial reports.
As a result of these conversations, I have walked away with a few great tips to share with you.
The first question you’ll be faced with is how to determine which information to keep and which to purge. You’ll want to start by determining which information has the most impact to the users of that information. Find out what they really care about and how they use the information being gathered in their work. To answer these questions, you’ll need to get out there and talk to the individuals who use your reports.
After having a conversation with your users, consider whether you can combine funds or programs that have similar purposes. Are there superfluous accounts that can be eliminated? What information is used in decision making processes?
Note: In simplifying, make sure you are maintaining appropriate information for whatever compliance requirements you may have for grantors or other agencies.
A key step in the simplification process is getting leadership on board. The support of management and governance, as applicable, of the organization will go a long way in helping to implement the changes you’re working toward. As primary users of the organization’s financial information, these individuals will likely be seeing the financial information you gather in a different way. Helping them to understand the benefits of a “less is more” objective can alleviate issues down the road. At the same time, it’s important to understand that your reporting efforts won’t ever be perfect for everyone. When you seek buy-in from the organization’s management team, they can help you determine which changes will have the most positive impact.
As discussions continue to take place with regard to your organization’s financial structure, developing policies or procedures around the maintenance of funds and accounts can help you capitalize on your efforts well into the future. Having the appropriate documentation in place for your new methods will be beneficial for making decisions when new programs are started down the road or when someone asks for new information to be tracked.
Finally, a consistent story or message from the organization’s leadership is important as the users are provided with a new set of information. Change isn’t easy for a lot of people. Expect your efforts to be met with at least a little resistance. However, setting the tone at the top will help speed up the adoption phase.
Keep your messaging simple, but informative. Furthermore, be sure the preparers of your organization’s information (likely the accounting team) fully understand the reasons for the change and how it will ultimately impact those who use the reports. This way, they are able to effectively navigate through any questions that may arise.
Serenity In Simplicity
Preparing impactful financial information doesn’t have to be complicated. Simply determine which information is the “right” information to maintain, work with management to identify a plan of action, determine the appropriate policies to put in place, and work to develop consistent messaging to facilitate a successful rollout of your efforts.
Hopefully you, too, will find serenity in the “less is more” mentality. Give me a call at 614.923.6543 or email the nonprofit services team at Rea & Associates for help reviewing the effectiveness of your organization’s reporting efforts.
By Mark Beebe, CPA (Zanesville office)