Month-End Close: 3 Best Practices for Speedy Success
How long does it take to complete your nonprofit’s month-end close?
According to a survey by Sage, about two-thirds of small to mid-sized businesses close their books in 15 days or less. However, 26% of those surveyed closed in one week or less (considered a best practice). Amazingly, nine percent of those surveyed closed their books in just one day. If you’re like most nonprofits, the majority of your delays stem from closing accounts payable. To help remedy that, here are three best practices to speed up your closing and financial reporting.
1 – Implement an AP cutoff for your nonprofit
The earlier your accounts payable cutoff date, the better. A best practice is to make your cutoff date no later than the second business day of the new month. To help achieve that goal, process all invoices by the last business day of the month. Here’s how:
- A week before month-end, look at your departmental profit-and-loss statements to find any missing invoices. It’s best to do this using a month-over-month report with budget-to-actual and at least five months of data. If you discover any missing expenses, request that the vendors provide invoices or estimates.
- After month-end, enter all bills that come in by the second day of the month.
- If not already, standardize your vendor invoice flow with a separate accounts payable email address (think AP@yournonprofit.org). Sell and solidify the idea to vendors by letting them know that they’ll get paid faster if they use the new AP email address moving forward.
2 – Improve your nonprofit’s corporate credit card management
Contact your credit card company and change your statement’s cutoff date to the 25th of the month. That way, your staff has more time to submit their expense reports. It also gives you five to six days of leeway to roll over to the next month (except, of course, at year-end). Also, in one of our recent blog posts regarding nonprofit compensation systems, we discussed the challenges of credit card use and ways to conquer those challenges. One was the importance of implementing an acceptable use policy — one that’s rigorously enforced to ensure reporting is done on time. It also helps to enforce a strict deadline for credit card users to submit their reports. Send friendly email reminders to those users the day before and the day of the deadline. If you’ve got any repeat offenders, let them (and their supervisors) know their card privileges could be at risk.
3 – Create an accruals checklist
Monthly accruals are expenses (or revenues) that have yet to be paid or received. A best practice is to create a checklist of recurring vendors and other standard accruals, even if they’re just estimates. That way, they can be posted and reversed on the first day of the new month. Keep in mind that this best practice emphasizes speed over accuracy. However, it’s no secret that month-end close is not incredibly precise anyway. Time is of the essence.
For the most timely reporting and a fast, efficient month-end close, our expert accounting team at Qbix can help. We provide nonprofits with all the month-end financial reports you need for yourself, your team, the finance committee, board members, and any other key stakeholders. Moreover, our cloud-based nonprofit accounting ecosystem uses the latest, most secure technology to accurately handle your daily processes, monthly reconciling, and year-end reporting. It’s time to eliminate your nonprofit accounting headaches. Don’t wait — consider outsourcing your accounting and schedule a free consultation call with us today. You’ve got nothing to lose.
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Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.
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