Nonprofit Finance is a Piece of Cake

Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)

A few weeks ago, my husband and I went to a cooking class.  We don’t have fancy skills, so we didn’t know what to expect.  Fortunately, we really only had to be good kitchen helpers.  A chef organized the entire class and told us what to do.  I have to say, it was a great experience and the outcome was delicious.  We even made a little chocolate cake.

You know how we always compare your finance function to a layer cake?  Cooking class was like that.  We kitchen helpers functioned as the basic operational layer and the chef was the layer above us, or controller.  She had the skills, knowledge and experience to make sure we did it right, didn’t miss anything and used the right techniques.   

When your operational accountant writes checks, enters expense invoices, records deposits and pays payroll, your basic transactions get recorded on your books.  That’s the basic layer of your finance cake.  You can print financial statements at this point, but they’re not ready to take to a meeting.  The cake isn’t baked yet.

How do you test your cake for doneness?  Press on it?  Stick it with a knife?  Everyone knows that if the batter is still wet, the cake isn’t finished baking.  You’d never take it to a party like that.  Did you know your financial statements are the same way?  They are.  Stay with me on this…

Enter the controller.  Like the chef, the controller tests the accounts for doneness.  Is everything complete?  Better record those electronic payments taken out by ACH.  Is it adjusted for the accrual basis?  Better record this month’s grant reimbursement receivable.  Is it done in accordance with GAAP?  Might as well record depreciation.  When the controller pokes the cake, she’ll probably make adjustments like these, and your statements might change in a big way.   

What can we learn?

Your finance function requires different skill levels.  The operational accountant handles the basic transactions efficiently and affordably, but you need someone at the controller level to make sure your books are complete, accurate and per GAAP.

Consider an outsourced accountant to help with your controller function.  You may not be able to afford a full time controller.  That’s ok, hire an outside accountant to be your head chef once a month.  You only need a piece of that layer, not the whole cake.

Find out more about controllership, in our Controllership and the Layer Cake of Finance session at the live seminar, 501(c)(fit!)— Financial Intensive training for the Nonprofit Executive coming up soon.

Find out about the special areas of nonprofit GAAP in our session on the Power of Financial Reporting— making your finance function work for you at the live seminar, 501(c)(fit!)— Financial Intensive training for the Nonprofit Executive coming up soon.

Now the cake is done.  Your statements are ready to take to a meeting.  Controllership is no mystery, it’s just a piece of cake.  How do you handle controllership in your organization? 

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