What exactly does professional bookkeeping do for a small non-profit?
April 25, 2024 1:30 PM Subscribe
As a non-accounting person, I'm vaguely aware that accounting can be complicated. Since starting in my ED role about two months ago, though, I'm not sure that our operation is complicated enough to warrant what we spend for a large external accounting firm. This is not related to auditing, which is done separately.
Many more details about our specific circumstances inside.
For general context: one of our part-time staff puts about 10 hours a week into bookkeeping on our end -- issuing invoices, checking that things have been paid, double-checking instructor hours, etc.
We've basically got two functions that seem to be where most of the accounting energy goes:
Payroll
We have two salaried employees and about 20 instructors on casual contracts (mostly as instructors, some have some additional office duties). There are varied pay rates depending on duties (online instruction pays less than on-site, for instance).
We:
Our casual staff all enter their worked hours into a form we manage that details which hours were worked in which categories, on which days. We review that information for accuracy, make sure it is organized in an easy to understand way, and hand it off to the accounting firm.
They:
Transpose what we give them into a payroll system, and remit pay through direct deposit, creating pay slips. They calculate and manage remittances for things like taxes, employment insurance, etc.
Vendors
We have eight monthly payments (HubSpot, our course-booking software, rent, phone, etc.) and ten other services that are paid once a year on varying months (DNS registration, web hosting, Zoom, etc.).
About once every two months, we have expenses that need to be reimbursed (buying food or supplies out of pocket for a tournament, etc.), where employees pay out of pocket and bring in receipts to get paid back.
We:
Receive, scan (if not digital), and upload all invoices to a system called Dext, where we code and categorize each expense.
They:
Publish Dext-loaded transactions to Quickbooks (if we're missing a source document or category, we have to double-check that in a system called UnCat), and then payables are pushed to another SAAS called Plooto.
We:
Log into Plooto and (re)validate all the expenses we have previously submitted in Dext for payment.
Plooto:
Takes the money out of our account, and then over the course of several business days, pays the bills we've approved for payment.
Revenues:
This is pretty straightforward: we have parents who book classes through an online system that remits that revenue regularly into our bank account, minus their cut. Schools pay us by direct deposit or mail in cheques, which we deposit in our account.
Taxes:
Not applicable to us, but just in case anyone was wondering -- registered charity, so we don't have any GST/HST complexities or remittances.
I'm not an accountant, much less a CPA. When I've asked casually about this with some other non-profits, the reaction frequently seems to be "this is something you must outsource, there are so many rules and it's so incredibly complicated to run a non-profit's finances."
This is usually accompanied by "there's no way I could take this on, I'm far too busy," and/or "I have an arts degree and don't do numbers!"
But I'm not sure if this is a legitimate "this takes way too much time and can't be done" or if there's just a general fear of numbers in my very arts-leaning sector.
If our instructors are logging their hours and we're double-checking them before sending, shouldn't a simple payroll calculator be able to pull the deductions, remit them, generate pay slips and direct deposit pay?
If we're meticulously capturing, categorizing, keeping and uploading all receipts and invoices into a system, couldn't we just pay our vendors directly and keep a good spreadsheet / file folders for source docs?
If we know exactly where our revenue comes in and we're getting it all logged and managed by the booking software, and/or have to photograph and document every cheque to deposit it anyway, what's left to manage there?
I'm... just not sure what all the fuss is about, really. If we have a p/t fianance person putitng in 10-12 hours a week prepping all this information for the accounting firm, it feels like we're just 2-3 hours away from being able to manage the payroll remittance / sending the direct deposits; ditto with paying vendors.
For general context: one of our part-time staff puts about 10 hours a week into bookkeeping on our end -- issuing invoices, checking that things have been paid, double-checking instructor hours, etc.
We've basically got two functions that seem to be where most of the accounting energy goes:
Payroll
We have two salaried employees and about 20 instructors on casual contracts (mostly as instructors, some have some additional office duties). There are varied pay rates depending on duties (online instruction pays less than on-site, for instance).
We:
Our casual staff all enter their worked hours into a form we manage that details which hours were worked in which categories, on which days. We review that information for accuracy, make sure it is organized in an easy to understand way, and hand it off to the accounting firm.
They:
Transpose what we give them into a payroll system, and remit pay through direct deposit, creating pay slips. They calculate and manage remittances for things like taxes, employment insurance, etc.
Vendors
We have eight monthly payments (HubSpot, our course-booking software, rent, phone, etc.) and ten other services that are paid once a year on varying months (DNS registration, web hosting, Zoom, etc.).
About once every two months, we have expenses that need to be reimbursed (buying food or supplies out of pocket for a tournament, etc.), where employees pay out of pocket and bring in receipts to get paid back.
We:
Receive, scan (if not digital), and upload all invoices to a system called Dext, where we code and categorize each expense.
They:
Publish Dext-loaded transactions to Quickbooks (if we're missing a source document or category, we have to double-check that in a system called UnCat), and then payables are pushed to another SAAS called Plooto.
We:
Log into Plooto and (re)validate all the expenses we have previously submitted in Dext for payment.
Plooto:
Takes the money out of our account, and then over the course of several business days, pays the bills we've approved for payment.
Revenues:
This is pretty straightforward: we have parents who book classes through an online system that remits that revenue regularly into our bank account, minus their cut. Schools pay us by direct deposit or mail in cheques, which we deposit in our account.
Taxes:
Not applicable to us, but just in case anyone was wondering -- registered charity, so we don't have any GST/HST complexities or remittances.
I'm not an accountant, much less a CPA. When I've asked casually about this with some other non-profits, the reaction frequently seems to be "this is something you must outsource, there are so many rules and it's so incredibly complicated to run a non-profit's finances."
This is usually accompanied by "there's no way I could take this on, I'm far too busy," and/or "I have an arts degree and don't do numbers!"
But I'm not sure if this is a legitimate "this takes way too much time and can't be done" or if there's just a general fear of numbers in my very arts-leaning sector.
If our instructors are logging their hours and we're double-checking them before sending, shouldn't a simple payroll calculator be able to pull the deductions, remit them, generate pay slips and direct deposit pay?
If we're meticulously capturing, categorizing, keeping and uploading all receipts and invoices into a system, couldn't we just pay our vendors directly and keep a good spreadsheet / file folders for source docs?
If we know exactly where our revenue comes in and we're getting it all logged and managed by the booking software, and/or have to photograph and document every cheque to deposit it anyway, what's left to manage there?
I'm... just not sure what all the fuss is about, really. If we have a p/t fianance person putitng in 10-12 hours a week prepping all this information for the accounting firm, it feels like we're just 2-3 hours away from being able to manage the payroll remittance / sending the direct deposits; ditto with paying vendors.
I wonder about whether risk outsourcing is part of this - there are things my institution (a different kind of nonprofit) *could* do ourselves, but we don’t, because there is significant legal risk exposure if we fuck it up, and the higher-ups would prefer to have that risk be held at arms’ length.
Things like payroll, while perhaps not a legal risk issue in the same way as the other stuff I deal with, are also in a bucket of “so incredibly important that it is absolutely worth paying someone to make sure there’s never a thing that gets skipped because the only trained person had a medical emergency, or didn’t know enough to know that the regulations had changed, or just that we don’t screw over our personnel by having this done by someone for whom it is not their primary expertise.”
posted by Stacey at 2:06 PM on April 25 [3 favorites]
Things like payroll, while perhaps not a legal risk issue in the same way as the other stuff I deal with, are also in a bucket of “so incredibly important that it is absolutely worth paying someone to make sure there’s never a thing that gets skipped because the only trained person had a medical emergency, or didn’t know enough to know that the regulations had changed, or just that we don’t screw over our personnel by having this done by someone for whom it is not their primary expertise.”
posted by Stacey at 2:06 PM on April 25 [3 favorites]
Response by poster: Not to threadsit, but just one point of clarification: grants / donations are currently not a key concern, and the contract with the accounting firm does not include generating reports for external funders.
Concerns about grant tracking and reporting are a non-issue for us presently (not to say that'll be the case forever, but for right now, that's not something we need to factor in).
posted by Shepherd at 2:34 PM on April 25
Concerns about grant tracking and reporting are a non-issue for us presently (not to say that'll be the case forever, but for right now, that's not something we need to factor in).
posted by Shepherd at 2:34 PM on April 25
Redirect that grants was just the example that I, a non-bookkeeper, thought of as a potential level of complexity.
In other words - my point was not grants so much as it is about bookkeeping being more than just the straightforward things you are seeing. If it's not grants it may be investors or legal compliance or some other issue.
posted by EmpressCallipygos at 3:19 PM on April 25
In other words - my point was not grants so much as it is about bookkeeping being more than just the straightforward things you are seeing. If it's not grants it may be investors or legal compliance or some other issue.
posted by EmpressCallipygos at 3:19 PM on April 25
Of course this is all doable in house, many non-profits do this. It's not like you have to calculate payroll manually as of course Quickbooks (and other options) can do this for you. Whether doing it in house or hiring an independent bookkeeper makes sense for your or not depends on costs, but I expect it would be cheaper than an accounting firm. I'd guess, very roughly based on my own experience in a small non-profit in Canada that has somewhat similar spending patterns, that this would take someone competent less than 20 hours per week (including what you are doing now on your end and what the accounting firm is doing).
Also, as a charity, you should be claiming the Public Service Bodies' rebate on GST you pay (through which you get half of it back).
posted by ssg at 3:55 PM on April 25 [2 favorites]
Also, as a charity, you should be claiming the Public Service Bodies' rebate on GST you pay (through which you get half of it back).
posted by ssg at 3:55 PM on April 25 [2 favorites]
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If our instructors are logging their hours and we're double-checking them before sending, shouldn't a simple payroll calculator be able to pull the deductions, remit them, generate pay slips and direct deposit pay?
Would that "simple payroll calculator" also be able to log which budget lines their pay is coming from, which grant (or multiple grants) are funding the various portions of their pay, and generate reports to those foundations about how their funds are being allocated, on a quarterly/monthly/annual basis as they've requested?
If we're meticulously capturing, categorizing, keeping and uploading all receipts and invoices into a system, couldn't we just pay our vendors directly and keep a good spreadsheet / file folders for source docs?
Does that system include the ability to generate different reports for the different foundations or investors who are ultimately funding you, in the specific format they request (and every one of them probably has a different format they prefer)?
If we know exactly where our revenue comes in and we're getting it all logged and managed by the booking software, and/or have to photograph and document every cheque to deposit it anyway, what's left to manage there?
If you're audited and need to be able to locate one single taxi receipt from the dude who filed it as part of an expense report that covered six different projects three years ago, would you be able to find just that one receipt because you're being audited just about that one project?
...I mean, I feel you - for those not familiar with bookkeeping it does seem like a pretty straightforward "person works X hours, they have Y deductions, x - y = z, cut the check and there you are". But the accountants and bookkeepers aren't just tracking things like we do with our checkbooks; they're also taking into account other sources of income your company may have - especially if you're a non-profit, because that means that they likely are receiving grants from various sources, and those various sources all tend to require different reports about "what did you do with the money we gave you" and the bookkeepers are on hand to sort that out because that shit gets complicated, especially if you want them to give you money again.
posted by EmpressCallipygos at 1:45 PM on April 25 [4 favorites]