Is this you? “I don’t know if my nonprofit’s accounting systems are bad… and I probably won’t know for sure until something bad happens.”

99% of nonprofit founders we work with don’t have a background in finance. If you struggle with feeling confident that your books are in order… and don’t know how to tell if they’re in order or not, this episode is for you.

This week on A Modern Nonprofit Podcast we discuss common red flags you can check today to verify your organization’s financial health.

In this episode, Isabel Sippo joins me to talk about the most common reasons why your nonprofit’s finances might be a mess, and ways to clean them up.

Isabel is the Onboarding Specialist at The Charity CFO. She focuses on helping new clients feel more confident about their financial records by re-engineering financial systems and minimizing opportunities for errors.

In this episode, you’ll discover…

• Key questions to ask if your books are out-of-date (5:50)
• 3 common issues that lead to messy, inconsistent books (10:56)
• The Big Red Flag you need to check for and how to fix it (15:28)
• How to get started so you minimize opportunities for errors (31:29)

Thanks for listening and be sure to subscribe for new episodes every week!

For more nonprofit accounting resources check out www.thecharitycfo.com.

🎧 Click here to listen to the Podcast on AnchorFM or Apple Podcasts

👇 Or scroll below to read the full transcript of our conversation

A Modern Nonprofit Podcast
Data Privacy Strategies for Modern Nonprofits

3/2/2022

Tosha Anderson:

Hey everyone. Welcome back to another episode of a modern nonprofit podcast. My name’s Tasha Anderson. I’m your host today? I brought along a special friend of mine, Isabel, not only, uh, do I consider you Isabel, a friend, but also a colleague of many, many years. And now more recently, one of my fellow coworkers, she actually works at the charity CFO now, and I’m super excited to have this conversation and I thought it was really cool to have you Isabel on because we have very similar, um, backgrounds, um, almost identical backgrounds, frankly. So Isabel you started your career. Um, actually even prior to public accounting, working on a couple different finance, finance, accounting, depart working for some pretty large organizations, um, both on the for-profit side, I think, and on the nonprofit side, but then you did a stint in public accounting and that’s where all of us accountants get a crash course and all things, accounting, um, across industries and myriad of problems that we come in contact with.

Tosha Anderson:

And that’s actually where I met. You used to audit nonprofit organizations back in the day, similar to me, but while I was the CFO of a nonprofit, you were my auditor. And when I left that organization, you actually took my spot. So really interesting stories. So you and I have both seen so many different nonprofits and we’ve both seen how quickly things it out of control, and we’ve both been responsible for cleaning up those messes. And now that you’re with the charity CFO, you are an onboarding specialist and your only job really is to help the newest clients in fixing their messes. And by messes, we mean, the books are just wrong. Um, they don’t know how to get them, right. Um, it could be just a failure to have any consistent processes, right? So how do I get this going and how do I get buy in from my team and how do I get it done consistently? Um, so that we can ensure we get through audits and then just kind of balancing all of those things together. So it Isabel, thanks for humoring me and coming on today and having conversations about your experience with messy accounting and how to get it fixed. Um, so again, thank you for, for taking time out of your busy schedule and chatting with me today about this.

Isabel Sippo:

Well thank you for having me and yeah, you’re absolutely right. I got to follow a lot of your footsteps. Um, some of your direct footsteps, which you left a great, uh, path for me. And then of course, as things evolve and companies change and get bigger and stuff, things change and yeah. Uh, you just have to learn to adapt.

Tosha Anderson:

Yeah. That’s one thing for certain in the nonprofit world and you and I both worked for an organization that was growing very quickly because they went through a merger, but even without that, right, uh, different funding opportunities come up and those get compounded onto the existing accounting needs. It’s already there. And then of course, funders change their mind or the accounting rules have changed over the last few years for nonprofits. So there’s always something that requires some sort of re-engineering. And that I think is where a lot of organizations really struggle. A couple things actually, number one, that we’ve alluded to transition in leadership. So transitioning from one account to the other, whether it’s an outsource person, it’s a senior level person or even a bookkeeper. And frankly, I think the transition, the bookkeepers are even, um, more susceptible to error and where things get really, really messy for our clients.

Tosha Anderson:

So that’s, that’s a common issue. And then also you have issues of size and complexity challenges, um, where you might have a person doing your accounting in place, but things have changed for one reason or another. And all of a sudden now that is beyond their skillset and we keep limping along and limping along, limping along, and then we keep adding more and more people because we think it’s a, uh, a band length issue. It’s a capacity issue. You, and really oftentimes it’s an understanding of the compliance needs issue, um, and a skillset, frankly, rather than, rather than a… a number of bodies issue. And so we’ve seen that happen a lot of times with organizations and before they know it fast forward, something happens. Um, it triggers in which they realize, wow, our accounting is not on track. And that’s what we’re gonna talk a little bit about today.

Tosha Anderson:

And I just wanna validate everybody. Um, I would say 99% of the people that I talk to that lead organizations, they do not come from a business background. They do not come from a finance background and their fear is always what they say to me. I don’t know what, I don’t know. I don’t know if my accounting is bad. I don’t know if my financial reports are inaccurate. I have some framework in which I might look at it and know, uh, that doesn’t seem totally right, but it’s not until something happens. And that’s something that happens is usually an auditor comes in, whether it’s your funder, whether it’s your financial statement, auditor, maybe it’s the tax return gets filed in correctly, or your board is just savvy enough to say, Hey, what’s going on here? And then you end up peeling, you know, the curtains a little bit and you realize, oh my gosh, this is an absolute disaster.

Tosha Anderson:

So we’re gonna talk about that. And for all of you that might suspect this may be happening. We’re gonna give you some tips on how to identify when that’s actually happening. So let’s just dive in Isabel with the first day. You look at a lot of accounting files all the time as part of your work here, certainly in your work, when you were a controller, a nonprofit organization, isn’t even prior to that, when you were an auditor, you’ve looked at a lot of accounting files. You’ve seen a lot of financial reports. What is the first few red flags that you see or that you go to when reviewing files, um, and those red flags or those points of referenced that helps you understand, okay, what is good or bad about this county system? What immediately speaks out to you? Like, Hey, we’ve got problems.

Isabel Sippo:

So I think, uh, the first place you always wanna look at is where they are in reconciling. Like, have they reconciled anything recently? Has it been years? If so, then you already know that you’re going into, um, get your, have to get your hands a little dirty to dig in and see, first of all, why they’re so behind and second of all, uh, what they need in order to be successful in reconciling. And then, um, the first place I always reconcile is if they’ve been audited, like let’s try and compare to the audited statements. Yeah. Why are they off? Why are they different? Usually it’s very simple. Um, after that, you just wanna go a little more in depth of looking at their outstanding accounts receivable. Why do we have outstanding accounts receivable? Are we billing timely? Are we expecting the money to come in? You know, where are we having hiccups in the road? Um, is there a cash flow issue? You could also determine that by looking at their accounts payable, like, why aren’t we paying bills? Are we nervous that we won’t have enough money in the bank? And, um, there are just a lot of different areas like that. You kind of want, uh, things clean. So how current they are is, uh, will help you determine if it’s a red flag or not. And comparing things to the audit is always the first step that I take.

Tosha Anderson:

Absolutely. And to reconcile that word is used, I think so regularly in the accounting world that it trips people up that are not accountants. So when I think of reconciling I’m with Isabel, I, I, first thing I do when somebody shares a file with me, when they’re like, oh, I wanna really share how far behind we are. Maybe a couple months. Like, just, why don’t you go ahead and send me your file. Uh, and the first thing I do is I look at the bank accounts, right? This is about like the cash. When is the last time they refiled their checking account, right? And if it’s been six months, eight months, 10 months, never, I’ve seen that before. Never. Um, then that tells you that what they’re, what that’s telling you is that what has hit the bank account, which is substantially almost everything that’s gonna show up in your accounting reports has never been actually double checked.

Tosha Anderson:

You’ve no one’s ever actually double checked that what’s hit. The bank account is actually been entered into the accounting system. And the opposite could happen are things that were hitting the bank account were omitted for in the accounting system. And then there’s also cases where things were put into the accounting system that never actually had the bank go and there could be duplicates and there could be omissions and there could be all sorts of things. And then the second type of reconciliation that we talk about, we talk about the balance sheet reconciliation. So basically you run a balance sheet report and essentially everything on that report should have, um, kind of an outside spreadsheet. You might be able to do it within the accounting system, but most accountants have an Excel spreadsheet. Now, Ismail, and I will say in practice, most accountants might only reconcile that once a year in practice.

Tosha Anderson:

Um, that’s not totally uncommon, but I would say best practice. What we like to do here is we do that every single month. So those are things of it Isabel’s referencing too. Are you when’s the last time somebody’s actually checked prepaids and here’s a here’s in my mind, a, a pretty sure sign that things are messy. Um, I look at when’s the last time the bank accounts have been reconciled and, and you should be able to find that in any accounting system, um, assuming that you’re not using like Excel, obviously Excel, wouldn’t be able to tell you that, but a QuickBooks or, you know, anything else that you’re using. The same thing I do is run the balance sheet report. And if you see any negative numbers on that balance sheet report, ask a lot of questions. If your accounts receivable is negative, if your accounts payable is negative, if there’s anything negative on there other than like accumulated depreciation, um, that’s a sure sign that something might be off and to Isabel coin.

Tosha Anderson:

The next thing I look at, you’re absolutely right. I look at accounts receivable. Um, and does that seem reasonable? You should know, as a leader of an organization, you generally owes me money and how frequently do people pay. So if you’re seeing, you know, funder, a, their balance is 120 days late, but, you know, fund a pays every single month, like clockwork, that’s a sure sign that things are off accounts payable, same way. If you’re noticing all of these positive and negative numbers on that report. And you’re showing that a lot of payments are over 90 days late, but you know, you have enough money and you’ve paid those bills. That’s another sure sign that things are off. So those are some pretty big red flags for me and Isabel when we inherit our clients. Um, and the good news is if you all have records like this, you are not alone.

Tosha Anderson:

You are not alone. Um, more often than not, this is common. Um, and unfortunately this happens, especially when you turn a over your accountants. And that is something that we see oftentimes in the nonprofit world, they’ll have a part-time person they’ll stick around, you know, for several months, a couple years, maybe then they change to another person and then they have to get up to speed. Um, and one thing about the county world as well, I don’t think people realize is much like any profession. There’s not always a black or white, right or wrong way of doing things is open to interpretation. And every accountant is going to have a different interpretation doesn’t necessarily mean it’s wrong. It’s just when you add all of these interpretations together, uh, you’re not in sync, you’re not in harmony. The, in the data of, within your accounting system could, um, not have a whole lot of it integrity. Right. So kinda keep that in mind. Okay. So now that we’ve looked at some of these accounting files and we’ve started seeing that doesn’t look right, what are some of the common issues you find when you take on some of our newest clients and look at their files? Like, what are the main things that are just wrong?

Isabel Sippo:

I, I think ultimately where all the issues stem from is the timeliness. So, um, many non-profit organizations, their finance department is always spread thin and helping every other department that they can, and then their finances always fall in the back burner. So, um, timeliness is usually the key of where all the issues are stemming from, like, why are the bank reconciliation not done on time? Why don’t have a finance report? Um, then when it does come to a deadline, they are scrambling to get things done. And there’s room for error there’s room for them not having the complete support time. I, you know, saved in the accounting system, saved in their files to reconcile to, and when people fall behind, they just keep falling behind. Yeah. And you have months of accounting work that doesn’t have any backup. Um, I feel like that’s where everything stems from.

Isabel Sippo:

There’s also the inconsistency of how things are recorded. So if people are picking things up and putting things down and then trying to fix it throughout the whole year, but they don’t have that standard. Like every month we’re gonna reconcile, you know, prepay aids and every month we’re gonna reconcile a bank. Um, it’s just hard to pick up and figure out where people left off, uh, during their cleanup also. Yeah. Some of the things that kind of piggybacking on what you said before is we have some bookkeepers that, um, you know, they were taught to do something one way and they never adapted, they have done the same journal entry every month for years, and it could be prepaids and we don’t have those expenses anymore, but we’re still allocating these random expenses and it’s, uh, they just don’t know when they should be adapting and when they should have changed and how they should look deeper into it, because they were told, this is how you do it. And sometimes They just need to have a process in reconciling and like looking at the back data to make sure that, uh, what they’re doing is actually what should be done

Tosha Anderson:

Well in, you said something that I think really, for me, boils down to the difference of doing accounting and bookkeeping. And what I tell people bookkeeping is getting the information into the accounting system. Accounting is to be able to look at those reports and know if that information was entered wrong, or the numbers are wrong and also understanding how to fix it. Right? Those are two totally different skill sets, um, is well, and I think so, oftentimes we see non-profits, they will hire bookkeepers that oftentimes have, uh, some sort of shared role. They do other things within the organization and you’re right. They just keep plugging along. This is the way we’ve always done it, da, da, but they don’t have somebody in house that can look at it and say, that is actually wrong. And here’s a pro tip. Um, and maybe I’ll get some hate mail from accountants out there later on.

Tosha Anderson:

But the funny thing is running the financial reports in a modern accounting system does not take any time hardly at all. It’s all of the work that goes into your financial reports, even being ready to be, um, paired, right? It’s all those reconciliations we’re talking about. So if your accountant is not giving you financial reports, they are 100% not getting, um, those reconciliations done. Otherwise they can hit print and the reports spit out mostly. Um, now a few messages from accountants out there that say, well, I have to do all these manual reports in most cases. And in essentially in almost every case for our clients, it’s all of the reconciliations that take a little bit of time, which is why it’s so important to be doing those on a monthly basis. Because if you do them on a monthly basis, then you’re only looking at if this is off, we’re only looking at 30 days or, you know, a month’s worth of activity.

Tosha Anderson:

If you’re not doing those. And you finally, as Isabel said, you get behind, you get behind, you get behind and then like, shoot. Now I have to go back and reconcile three months worth. Well, yeah, that’s why you can’t get the reports out because you’re taking that much more time to go through 90 days worth of activity and figure out where do things go wrong as opposed to just 30 days. So if you’re not getting your reports, it’s likely because you’re not getting the reconciliations done. And if the reconciliations aren’t being done, that likely means that there’s some disputes between what your accounting system says is in the system and what, um, your bank account says and what the accounting rules say should be in the system. So there’s a disconnect there. So that should be a pretty red flag, a pretty big red flag.

Tosha Anderson:

If you’re not getting ongoing financial reports, that means something within your accounting function has gone off the rails. And that usually means that those reconciliations aren’t getting done, or the information’s not getting into the accounting system. We just onboarded a client, um, a few months ago. And this is a pretty large organization. I mean, I think there are budgets about 6 million a year for many of you out there hearing we, well, you know, I’m a small organization and I have all these problems that I’m alone because I don’t have more money. And if I had more money, I can hire accounting teams. We are here to debunk that myth, um, that larger organizations don’t have these problems, Isabel and I work with and talk with very large organizations, uh, you know, upwards of 10 million or more a year that have had this same problems that we’re describing.

Tosha Anderson:

So you are not alone. That’s the good news. Um, the bad news is we still gotta fix the problems at some point. So even really large organizations have this issue. And if you know that once those financial reports stop rolling in things have gone off the rails. And so if it’s a matter of, well, I just haven’t had time to, you know, get things done. Um, that’s a pretty big issue because when you fall behind, it’s gonna take a lot more time to get things up to speed. Okay. So those are some of the common issues that we find. Um, when starting to look at accounting files, we kind of alluded to it. AR is really off cap payables, really off cash balance could be really off. Um, we might have determined, um, some of the other things that I find kind of looking at AR and AP at the same time.

Tosha Anderson:

Um, once you get all that information to the system, you might notice, oh, shoot, I forgot to build this funder pretty big problem. Um, so we wanna make sure that cash never ends. And without seeing those reports on a monthly basis, you don’t see is revenue hitting every single funder as it should on the property. And lost statement are the statement of activities. If it’s not, that might mean that cash is not gonna continue flowing into the organization. So you need to be. And I pro tip too, just because it shows up on the financial report does not mean your accountant actually submitted the billing to the funder. That’s a whole separate process. Um, we’ve had that mistake happen for our clients. Okay.

Isabel Sippo:

And we’ve had situations where they just have to plug in an estimate because they’re waiting from the funder to come back with them with like a new temp, something. And then, you know, by the time it comes out,

Tosha Anderson:

They’re behind.

Isabel Sippo:

But we still have that number that was accrued on our statement.

Tosha Anderson:

Yeah. I would say for me, common issues could include easy fixes, um, payments like bills, payments might have been entered twice. Deposits might have been entered twice. Those are easy things cuz we didn’t actually deposit the check twice. We didn’t actually pay ’em better twice. It’s just duplication. So those are kind of easier issues, more call common issues that some of those balance sheet accounts prepaids accrued expenses. Those sort of things were never booked accordingly. Um, depreciation expense. Those are pretty easy. You can just go and tweak those. So those are kind of like more common issue, more serious issues. I would say that we often find that billing has not been submitted to the funder and, and or collected, um, on a timely basis. So that in impacts your cashflow other issues where we’ve seen, um, where we’ve identified that payroll taxes were not being remitted to the IRS.

Tosha Anderson:

Right? And so they’re finding that they have fallen behind on remitting. Now this should be done by your payroll company automatically, but for whatever reason, some organizations decide to try to do yourself pro tip strongly advised not to do that. But anyway, some do. And then you realize really big things like your IRA or your 401k deferrals were not remitted. Your taxes weren’t remitted, right? If you are not checking, what’s hitting the bank account versus what’s supposed to be hitting the bank account. That’s where you fall into issues with the IRS potentially department of labor. So those are bigger issues that are aren’t as common, but they still happen often enough that it makes my list. Um, but those are the kind of things that you look at. All right. So now that we’ve invoked all of the fear, um, into everyone Isabel and that these are the things you should, um, kind of be looking at. These are kind of the worst case scenarios. What is some advice you’d offer up to leaders of nonprofits to so that they can check and make sure that their accountants are doing a quality job. They’re doing the things that they need to be doing to keep the wheels turning within the organization. What advice might you give?

Isabel Sippo:

Um, the first advice I would give is to kind of get involved with the auditors. Don’t get involved in the like nitty gritty, all the paperwork and stuff, but at the end of the audit, when they’re going over adjusting journal entries and like all the changes that they had to make, make your executive team or your CEO part of that so that they can see like, Hey, these adjustments that they did, are we capable of doing it internally? Like why are they doing this? Get an understanding of, um, where the auditors are seeing changes should be made and see if we can, like you can update your department on how to right. Uh, do those processes. Um, another thing I would definitely say to leadership is with the time issue, um, if your finance department isn’t getting things to you timely, why not? I have worked in a non profit.

Isabel Sippo:

Tasha has worked in a non-for-profit there have been days where I was the only person after hours and then a toilet’s running and they’re like, oh my gosh, what do do we call, um, you know, rocks thrown through breaking windows. And we have to take inventory quickly on if any technology was stolen, getting an alarm that goes off that, you know, there’s a suspicious person in the lobby. That’s not making people feel safe. They encounter all this stuff. And then a lot of the times since finance is part of admin and um, so someone’s not answering fault phones. The first department they go to is, Hey finance, can you answer phones and direct phones? And the team takes on more than they can chew. Most of the time, a lot falls on finance. I know that doesn’t sound like the number one place where it happens, but all these little things add up and then don’t get done.

Isabel Sippo:

So I would suggest like leaders talk to your finance department, why aren’t things getting done? What have you done? That’s outside of your job description? You know what your job description is and, um, figure out a plan on how to prioritize their job. I always recommend to, um, cuz I have clients that are like, well this happened or I found out my bookkeeper was helping with plugging in donations and stuff. Right? I always say, Hey, tell your staff. If someone asks me to do something, you have to talk to my supervisor and get my supervisor’s permission for me to, uh, take this thing. That’s not typically my task. Of course everyone wants their department to be a team player. So nobody wants to not help out. But, um, that I feel like tends to be one of the biggest issues with the timeliness that, you know, finance is helping with grants, finances, helping with reports or funders or, you know, new rules was because of the pandemic that came out with payroll. Now everyone’s wondering to know like how these things change and uh, just have to provide support to the finance team to make sure that they can actually do their finance jobs and try to keep them on their narrow path.

Tosha Anderson:

Yes, yes. And I, I wanna do a whole nother episode on our podcast about this, but you bring up a really good point. One of the things that so you and I both obviously worked within a nonprofit and there was nothing exceptionally unusual about this organization and by way of being pulled in so many different directions, right? It happens all the time. This is not a judgment on, on this one particular organization. I’ve seen it time after time, after time, after time and every single person that I have worked with that have chosen to leave nonprofit organizations and anybody listening that works for an organization. I know you can, um, validate this and I know you can re relate to it that you’re pulled in so many different directions that you find that your primary responsibility, which, which in this particular case that we’re talking about is accounting and finance becomes a very small percentage of what you’re actually doing.

Tosha Anderson:

And I believe so strongly in this, that I was, you know, my background is accounting and finance and I was spending so little of my time doing that and being put in roles that I don’t have any experience and I don’t have any, um, specific skills in necessarily. And then you end up finding yourself in a place where you’re kind of just surviving in all of these different, you’re not thriving in any particular area. You’re not excelling in any particular area. And if you, you have a high performer, that’s in that role. And they feel like day after day after day after day, that they’re only surviving. This is where the burnout comes into play. And I feel so strongly about this, that whenever I actually left that organization, I was there for four years and, and I started this firm and I thought we’re only gonna do the thing that we’re best at. We’re gonna do accounting and finance for nonprofits. We only work with nonprofit. We only do accounting work. We don’t pretend to be HR experts. We’re not it experts. We’re not facility managers. We’re not, you know, we’re none of these things I’m not gonna, I’m not your program compliance person. I’m none of these things. I not make any

Isabel Sippo:

Client database or

Tosha Anderson:

Yes, yes. All of these things. And within our organization, I’ve realized, um, as a leader, you know, that I, this is a little bit off the rails from accounting and finance, but I really tried to figure out what is every single person on my team. And we have, um, over 30 team members now, what is their primary job, their primary job. We have to have a few Swiss army knives, right? For all of the things that you were describing, Isabel, you know, this happens and this happens, we do have a couple Swiss army knives, but as we keep growing, I keep, you know, identifying, okay, how can we pair this person’s responsibilities down? How can we pair this person’s responsibilities down so that they really have a primary job. And so to your point, Isabel, if your accountant has 10 other jobs, and then you’re wondering why, um, we can’t get the finance in order why we can’t get the accounting in order.

Tosha Anderson:

Oftentimes it’s because that primary job of them having accounting and financial management is often a very, very, very secondary role. I used to joke. I came in from seven to 9:00 AM to work on the accounting, which I’m a CPA, you know, that’s what they hired me for, you know, accounting background. And I spent the whole working day putting fires out for everything, but accounting and finance, frankly. Um, and then not unusual at all. And so I’m with you as well. If there’s things going on, it’s usually there are two, two different options in my mind. Um, it’s, they’re way above their head. They’re way they’re in way above their head from a technical accounting standpoint. And they just don’t know how to do the work. Or number two, they’re distracted with all these ancillary like responsibility is that they don’t have time to do the work.

Tosha Anderson:

Right. And so oftentimes what we’ll see is we’ll keep adding. We meaning the nonprofit organizations, we’ll just keep adding on more and more and more people within the accounting function. But the person that really understands the accounting and the process and all those things, they still don’t have the time or the responsibilities to, um, I should say they don’t have the time, the capacity to focus on those responsibilities to actually delegate those things, to, to train those things. So I think what was wise for this particular organization, when, when I had left, they started hiring more formalized positions. Okay, we’re gonna hire an HR function to do the HR stuff that we used to have the account do. We’re gonna hire, you know, a database person to work on the program database. We’re gonna hire maybe billion people to focus on. I’m making things up now.

Tosha Anderson:

Right. Um, but really kinda start carving out more of those responsibilities that aren’t really accounting in finance, uh, so that you’re accounting and finance people can really focus on just that. So anyway, that’s a little soapbox I can go on. And again, I wanna do a whole different episode on that, but back to, you know, really the meat potatoes of why we’re here now that we’ve identified the something’s going wrong in the accounting department. Um, whatever we figure it out, let’s say it’s, it’s one of those issues that I mentioned, which is more often than not the case is the, uh, the accounts are weighing over their head, they’re weighing over their head. Um, so oftentimes I know Isabel, you’ve seen this where you’ve inherited a set of books from somebody that might have had a banking background. They might have had a financial type background.

Tosha Anderson:

Uh, and I think us non-accountants, uh, well, if you understand finance and it’s it’s finance and accounting and how different can it be? And the reality is there’s two different types of accountants in my mind. Um, probably more than that, but there’s the day to day routine, very tedious, very reliable, get the information to the accounting system kind of person. Then there’s more like creative high level strategy, fix the world problems kind of person. Right? And oftentimes what I see as an organization will either hire 80% of the work is in the, get the, get the information to the system and get it done accurately and timely, right? That’s probably 80% of the work. So a non-profit will hire that 80% person. There’s a skillset gap between where we are at and where we want go is that 20% problem solving strategic leader type of person is not really within that wheelhouse or they’ll hire the 20% person. This is strategy person, but they have no idea how to actually do the day to day accounting, or they don’t have any desire to do the day to day accounting. Right. And they get burned out and then they end up leaving in a couple years, and then you’re by to the same situation you’re looking to higher again. So there’s

Isabel Sippo:

Philosopher with their head in the clouds. Like they have these grand plans, but like we need to get down in the nitty gritty and get it done. Yeah.

Tosha Anderson:

To get the work done. Yeah. Yeah. So then these organizations, right. Find themselves, you know, they either let go of the 80% person because they’re not quite what they need. Um, or the 20% person either gets, let go or ends up leaving because they’re falling further and further behind. Um, or the person just burn out the work, doesn’t be their soul. And by the way, they got an offer making more money, doing something else who knows, right. These sort of things. So then you’re left to, okay, now we’ve figured out we have this huge accounting problem. Um, it’s messy and we need to clean it up. And I have no idea where to start. I’m pretending to be a leader. You can tell I’ve had this conversation so many times, Tasha, I am not an accountant. I’m a program person. I’ve been in the program side for 17 years.

Tosha Anderson:

I stepped into this position as an interim CEO. We’ve changed CFOs two times in the last three years. I don’t know what the accounting should look like. I don’t know what condition the accounting is. And frankly, I don’t even know how to effectively interview an accountant to make sure I hire a person that does know how to do it. I don’t even know where to go from here, but all I know is my funders haven’t been billed in several months, we’re running outta cash. I have to turn the ship the right way. And I don’t know where to go. This is a true story. And so that’s where a lot of leaders struggle with. How do I even write the ship? Um, so I wanna talk a little bit about the cleanup, just how you, when, like what steps you should initially take and maybe what skills you should look at, or, you know, just some bumper bowling. I call it like some parameters, some boundaries for which, you know, that things are moving in the right direction. So let’s talk about that as about a little bit, where do you typically like to start? Or where would you advise someone to start when they’re dealing with, we know the accounting files an absolute disaster and this whole accounting function is a disaster we need to move forward.

Isabel Sippo:

Um, I always say pick a point in time. It’s very easy when, uh, you have had an audit because you can start from the last audit that you’ve had, the auditors have done their work, they’ve done some due diligence. Like you have already financials that were presented out publicly. Um, it’s easy for them. You choose that last financial audit that you’ve had and you make sure that you reconcile, uh, the books to that. And then you have a starting point. Um, a lot of times nonprofits, uh, and you know, audit firms, aren’t bad guys. They want you to also succeed as well. So they will provide all these journal entry is that they just assume that they have to do every month. Um, so your books have never actually caught up internally. Uh, if you haven’t had an audit, that’s fine. Pick a point in time, do not pick 10 years ago.

Isabel Sippo:

You don’t need to be reconciling 10 years documentation start with last year, pick a date, re I, uh, and start reconciling from that point on, um, not only, uh, with tackling the accounts, they, they should be reconciling and cleaning things up and writing things off. It’s also a time for them to review the chart of accounts, their project codes, their T codes and stuff. If a lot of, I feel like a lot of nonprofits, a lot of account, you know, accounting systems in general, sometimes I think more is more and it’s not really like clean it up. Let’s hide things that have not been active in years. Let’s try to minimize any opportunities for errors, um, the value it, what you have. And then just, if things can be consolidated, we don’t need, you know, like supplies for the office and office supplies is a different, different account, you know, uh, try to make things as concise as possible, um, remove things that need to be removed because not only is it easier for you to do your day to day job, but then it’s easier and cleaner for board members, administration, donors, to be able to look at documentation and get a better understanding of what’s really going on.

Tosha Anderson:

Yeah. And I would add too, what we do for one of my favorite things that, that we do for, for our clients, when we go through onboarding, um, by onboarding, it usually includes cleanup, meaning, uh, we do a really intensive review, um, kind of an interview it’s usually takes an hour and a half, two hours. And we go through every single element of, of your accounting, more specifically, focusing on how money’s coming in and how money’s going out, right. The flow of funds. And we talk about those processes and we go down like, okay, let’s talk about all the different revenue sources. Let’s talk about all the different expense, you know, sources. How does expenses go out? Whether it’s through bill pays, um, through checks or credit cards or ACHs or whatever. Right. And then we talk about other things that are on the balance sheet.

Tosha Anderson:

So again, run that balance sheet report. If you don’t have a balance sheet report, pull out your last audit, pull out your last tax return, whichever and go through each one of those accounts. Okay. So if we have investments, do we know what makes up those investments? Do we know if there’s any strings tied to the investments? Like, ask all the questions. Okay. Prepaid expenses. Do we know what to have? That is, oh, that’s when we moved into our new office space and that’s a deposit. Okay, cool. To start understanding, like, what do these numbers stand for? And then take it a step further, especially on the billing on the money coming in and money going out. Do you understand what the processes are for every single one of those sources? Right. Um, and if you don’t, again, judgment zone, uh, you can blame the accountant, blame the transition and accountant or whatever, and have that conversation with your funders.

Tosha Anderson:

Hey, do you have a training guide? Do you have a funding manual? Um, I, you know, I can’t get, get passwords, like get passwords. So that’s always something that we talk about during our onboarding before we even completely dive in is just to make sure that business continues to operate and we will continue to populate the accounting database, but we understand the processes again, making sure money comes in, money goes out payroll, you know, how your employees are gonna get paid, any other key vendors that need to get paid, those sort of things. So definitely understanding what the process is. And then you can start getting that information into the accounting system as well. And then with Isabel. I love that. Go back to a point in time, which you believe very reasonably, that those numbers were accurate. If it was an audit that you have to assume is a hundred percent accurate because the auditors gave an opinion that it was accurate.

Tosha Anderson:

So you don’t wanna argue with that cuz you paid for that audit opinion. Now, if you don’t have an audit, go back to you, the last tax return that was prepared, um, for which, um, you know, somebody preferably hopefully, um, some sort of CPA has reviewed your files, felt confident enough in the numbers that they’d be willing to swap their name across the bottom of that tax return. So start with those numbers and then we call that kind of rolling forward. So as Isabel was saying, say your last tax return for was for December, 2020. Okay. Now you know that you have a whole year’s worth of activity. So then you’re gonna get all that information from your da your bank. Um, and then you’re gonna get that into your account sort, start categorizing it. And then you’re gonna start going through again, that process documentation of the institutional know, gathering of, do I know what all these sources of revenue are?

Tosha Anderson:

Do I know what all these expenses are, start populating that. And then what we do is go month by month and reconcile the bank statements, we’ve at least accounted for everything that hit the bank account, everything that hit the bank account. Now the categorization might need to be updated. That’s shown into office supplies instead of profession development or whatever. We know that all the money that came in and all the money that went out within the bank account ended up in our accounting system. So that’s usually where we start with things too. Um, okay. So coming up, running up out of time, Isabel, I wanna wrap this up. Any other advice that you might offer leaders of organizations inside or outside of the accounting function, right? Um, maybe how they can handle their accounting and financial management better. Um, I know we talked a little bit more about just having open and honest conversation with your finance folks about all the things that they’re dealing with, but anything else beyond that, that you might wanna share?

Isabel Sippo:

Yeah, I think, um, a great place to start, trying to make an improvement is to, uh, meet with your team regularly, meet with them first week, create a checklist. Was everyone responsible for have the checklist as detailed as possible. If you know that payroll can be in by the third of the month, make sure that’s the deadline. This also allows for, when you do meet with them monthly, you can talk to your team of specifically, Hey, you haven’t met these deadlines yet. Why not? And I don’t like to go talk to people, very judgmental, making assumption, you know, approach it positively. There’s positively logical reasons why. Yeah. Um, there’s been a delay and if there, it also allows you opportunity of if they are falling behind how you can approach them to say, what can I do to help you in order for us to meet our deadlines?

Isabel Sippo:

Um, yeah, be a little proactive. Uh, not only making checklists, you know, don’t reinvent the wheel, let’s work on trying to make templates. I feel like, especially from personal experience, you know, you create a uniform way to build all these different funders and stuff, try to create a template that’s kind of universal. Um, sometimes it, you kind of like lose your footing because suddenly all these funders want different information, uh, that you need to, uh, supply to them. So in those moments, take a few extra minutes and see if there’s an easier way that you could take add more into the monthly reporting that you’re doing so that you can kind of make it consistent across the board instead of constantly making a different, unique, um, process for every single step. Whenever for the most part, you could try to keep things as consistent as possible. Absolutely. Um, and in order to kind of improve timeliness, you know, create templates, create recurring entries, um, like I said, Uh, formatting of running reports that have all the information that you need. And then also evaluating like if development is needing certain kind of reports a certain way, is there a way for us to also build that kind of template in our system? Just so you’re, department’s not spending an hour manipulating data that you have every single time they need something. Yeah. Let’s try to think how we can use things, uh, more than once, uh, moving forward.

Tosha Anderson:

Love that. Speaking of that was gonna be my advice a little bit on the month end reports. I remember when I used to work at a nonprofit organization every single month, I would actually print the reports and I would sit down with the CEO and I would walk through every report every single month. And it was a good exercise, um, because I was then forced to be prepared to present the key findings and takeaways. And it forced her to sit down with me and understand and ask, follow up questions. And I will say now that I’m a leader of an organization, I really struggle with doing all of the things that I need to do to effectively manage the company. Um, there’s just so many things and so many people to be accountable for. So what I have found that works best for me is having systems of accountability for myself.

Tosha Anderson:

So I assign all these tasks to my team members that really sound like maybe I’m keeping, um, them accountable. It’s really a process that helps me keep myself accountable. So if I know that I’m asking for a report for each one of my team members so that we can go over it, I, in a meeting, they think they’re being accountable and oh, well I have to show Tasha what I’m doing every month. No, actually it’s so that when I sit down on that report or sit down at that meeting, I have all these reports and I’m forced to then sit down and walk through them. And then I ask all the appropriate questions. And because we have this recurring meeting set up every single month, I know that I’m gonna have to force myself to be prepared for that meeting. And I’m gonna look at these things.

Tosha Anderson:

So as, or this business has continued to grow and grow and grow and grow. Um, and I’m, you know, running around like, you know, uh, just a, a maniac, right? Um, and it’s not unique to nonprofits. It’s unique to any sort of entrepreneur leader of any business that you’re pulled in a million different directions. So have that system of accountability, I’ve talked to so many leaders of organizations that say they wish they understood their finances more. And I think the easiest way to get an understanding is set that recurring meeting with your accountant, have that person actually print that report. Don’t email it to you and expect you to review it on your own time. Is that gonna happen? At least initially when you develop the, have it’s sitting down actually with a paper, um, report if necessary, um, and pour over those numbers, understand those numbers, um, and ask questions, uh, and not just look at it from compared to last year, maybe compared to last month, why did cash go down this past month?

Tosha Anderson:

Oh, well, because this funder was late paying us or whatever. Um, so sit down and ask those questions. That would be our advice to you. But anyway, Isabel, we are running out of time. So I wanna say thank you again for joining us and having this conversation. I know it’s painful for a lot of people to even think about or talk about their skeletons and their financial closet, but, uh, we’re here to help if you all need any assistance or help go to our website, thecharitycfo.com, Isabel, and I will be happy to chat with you, about what that might look like for us to help you, or at least offer some, pointers in the right direction on how to handle that. So stay tuned for the next episode. Thanks again. Bye everyone.

During the “Great Recession,” nonprofits have lost their accountants and financial directors at record rates. And finding new, qualified help that they can afford is nearly impossible…

At the same time, hundreds of nonprofits are waking up to realize that the financial structure they’ve always relied on doesn’t work as well any more. And they’re tired of the hamster wheel of hiring, re-hiring, training, and re-training bookkeepers and accountants.

So why do accountants leave nonprofit organizations? And what can nonprofits do to create consistency and predictability in the financial side of their operations?

Triná Owens is a former nonprofit financial director who left her job to become an Accounting Manager at The Charity CFO. In this episode, she and Tosha tell you the top reasons that your accountants don’t stick around. And show you how modern nonprofits are rethinking the way they handle specialized skills like HR and Accounting.

In this episode, you’ll discover:

• The top 3 reasons nonprofit accountants walk out the door
• Why turnover in the financial department is SO damaging for nonprofits
• The reason your finance director spends just 25% of their time on finances
• Why HR compliance issues are a bigger risk than tax compliance for most organizations (and why you shouldn’t trust your accountant with HR)

Thanks for watching. Be sure to subscribe for new episodes every week!

For more nonprofit accounting resources check out www.thecharitycfo.com

For more information on how to create consistency and peace of mind by outsourcing your accounting, visit https://TheCharityCFO.com/. Or book a free consultation at https://thecharitycfo.com/contact/

🎧 Click here to listen to the Podcast on AnchorFM or Apple Podcasts

👇 Or scroll below to read the full transcript of our conversation

A Modern Nonprofit Podcast
Why Do Nonprofit Accountants Quit?

4/15/2022

Tosha Anderson:

Hey friends. Welcome back to another episode of a modern nonprofit podcast. I, I say this every single episode, but I’m super excited to talk about this. Um, Sharon, a little bit about my story, but I brought along a friend of mine and also a fellow colleague at The Charity CFO. It’s we are going to talk about why nonprofits are quitting, their accountants. Yes. This sounds weird. Stay with us and we’ll help you explain. And maybe we’ll talk about why the accountants are quitting the nonprofits too. I don’t know. But, um, let’s just go ahead and dive right into the conversation. So some of you all probably know, or maybe you don’t know that when I started career, I started working in public accounting. I used to audit nonprofit organizations. Um, I, all of you that deal with auditors that come in on an annual basis, that’s essentially what I did.

Tosha Anderson:

So, um, it was at that time that I realized how vulnerable nonprofits are when they don’t have good financial management. And I thought I am going to commit my career to fix the, this problem. So that’s when I took a position as a CFO of a nonprofit organization, did that for four years. My official title was actually director of business and finance, which if anybody’s listening, you know what that means? I did all of the things I did accounting. I did HR. I did it. I did risk management. I did, um, quality insurance. Um, also the program side, like just making sure that everything was billed correctly and dealing with all of these things and was such a huge job. Now, my view, I only had a background in accounting. I was not prepared or equipped or skilled in any of these other things. And I’m not the only one that finds themselves in that situation. In fact, I think, what do we have? Like five or six people that has a similar story we have and Triná, you are absolutely one of those too. Trina, tell us a little bit about your background because you and I share kind of a similar path in terms of our career and what ended up leading us here.

Triná Owens:

Absolutely. And thank you for having me Tasha. This is absolutely cool. Um, so my background again is accounting, uh, over 10 years of accounting experience, but my last position held was the director of finance and administration, which again, as you just explained is finance and other things, finance and everything that’s not program. And so, um, that was the last position that I’ve held, um, which included payroll, HR, maybe of course it liaison duties because it’s usually outsourced. Um, so kind of that everything else position. So, um, yeah, definitely the same experience there

Tosha Anderson:

And just to put it in perspective, uh, Triná and I both worked for social service agencies that I would say were less than $10 million. So, uh, in the grand scheme of things, I think that’s probably in the same ballpark as as many nonprofit organizations tend to be, um, certainly smaller and have these hybrid roles. So we’re gonna craft this conversation around that, but Triná I’m super excited. Um, Triná is actually an accounting manager for us and she now helps co lead this firm to help us work with many, many nonprofit organizations. So we have some interesting, um, perspectives because we used to work for nonprofits. Um, Triná’s actually worked for a couple nonprofits, uh, in the similar capacity that you just described, Triná. Uh, and now we work with many, many nonprofits, I think right now we work close to 150 nonprofits every single month.

Tosha Anderson:

So, um, we talk to a lot of an individuals we help problem solve. Um, and more importantly, we talk about that transition plan for a lot of nonprofits that are dealing with, uh, the loss of their accountants. So, um, is that not even more clear in the last two years, uh, the, the need for transition, the need for succession plan, I’ve been hearing the consultants and the funders succession plan succession plan all of the years that I’ve been in this space, but it’s really been true, I think in the last two years, Trinity, I’m sure you would agree with that.

Triná Owens:

Absolutely, absolutely. It’s um, definitely time to, that’s the thing about nonprofits that I I’ve learned either. They have people that are there forever or people that are in and out in and out. Yeah. And so succession planning is very important. Um,

Tosha Anderson:

Yeah, yeah, yeah, totally. And there’s this concept, uh, that I find fascinating and I follow for a lot of reasons, not just because I lead this organization, but this concept of the great resignation, uh, nonprofits are not immune to this. Right. I mean, we see our clients constantly struggling, um, to find clinicians, uh, you know, educators, administrators, all sorts of backgrounds. Um, and they came across this article and this is not gonna come just a rise to anybody listening, but it says a recent article suggests that nonprofit staff are quitting for a number of reasons, including there’s limited growth for opportunity. They’re underpaid. The department is underfunded, the workplace isn’t modern or flexible and, or the workplace is toxic. All of those triggered me, uh, yeah. Which one resonated the most with you and why?

Triná Owens:

Um, so the most, uh, would be growth opportunities. I’ve left at least two organizations because of I had, I, I couldn’t go up anymore. Again, going back to, um, nonprofits, they have people that are in and out rotating doors and then they have people that have been there forever. And, you know, they’ve been there 20 plus years. And so if you wanna move up again, I’ve been financed trying to move up than the accounting departments. There’s nowhere else for me to go. So that’s the one that, um, resonates the most. The second one of course is the underfunded. Yeah. Um, you know, accounting and finance are pretty important to me, but from a mission standpoint and a program standpoint, it may not be the most important department right. To the nonprofit. So, um, underfunding also, you know, kind of strikes a nerve for me. You know,

Tosha Anderson:

You said something, um, that I talk about a lot, there’s nowhere else to go really when you are in these chief roles. Um, and when I said earlier, nonprofits are quitting, their accountants, what I really mean is they’re quitting their chief financial role. Um, and here’s what I’ve learned that 80% of the accounting done within a year for a nonprofit organization is a transactional input output. Um, some bookkeeping, some pretty basic accounting. Right, right. So this is, you know, I don’t wanna say entry level, but in many ways kind of entry level entry to mid-level. And when you have the CFO role, that is an, a player that you bring in that really loves so much more than just doing the 80% of the work. That’s 80% of their work they’re doing is likely things that aren’t gonna feed their soul. So what I’ve learned today, and you can speak to this too.

Tosha Anderson:

There’s actually two, probably more, but two main types of accountants. There’s the input outputs, the detail orientated, get things done, very consistent, thrives, and routine. And, and, and that’s amazing because 80% of the work, yeah. Those people though are not like the other 20% of accountants, which is more like strategy, problem solving exactly. Coming up with new solutions. And when we talk with nonprofits, you know, it’s, you know, I either have the 80% covered, but my person is limited in their skillset for that 20%. Or I have that a 20% person that loves the problem solving, but they’re bored out of their minds…

Triná Owens:

Because they have to do

Tosha Anderson:

80% of the work. And then when they’re in a place like you were just describing with nowhere else to go, when you sit and you think, is this it for me, if I’m spending 80% of my days doing things that are feeding my soul and there’s nowhere else to go, that I can get more into that strategy level. And I think that that’s the challenge that nonprofits are facing because they need both of these skill sets, but the budget, um, or the size or whatever, do justify the need to have two different people. Right, right, right. Would you, would you say that was your case too? It certainly was mine.

Triná Owens:

Definitely. I think in one position, again, not trying to name any names, um, but in one position, um, I did find myself stuck doing that, uh, day to day, those day to day operations. When I knew that I prefer to do more analytical work. Um right. But there was no time for that because of course it still had to be done. Um, and so maybe they couldn’t afford another hum, another person in that position. So, um, you do tend to get stuck in certain areas. And so it makes it very difficult to, uh, to advance really, you know, and as a, as a, as a professional, it’s important that I grow. And so that kind of stunt your growth as well as a professional, you know, as a professional you’re thinking, okay, I gotta make sure I’m, I’m getting better. I gotta make sure I’m learning more and doing more. But, um, when you get in some of those positions that the opportunity is just not there. The time is not there to do everything that’s required.

Tosha Anderson:

Well, and if was listening to this, like, you know, or whoever’s listening to this, you know, is an, a player you’re an, a player you wanna grow, you wanna develop, you wanna do

Triná Owens:

Absolutely

Tosha Anderson:

Any organizations would be thrilled to have you on board. But the challenge to me also goes back to the underfunded part of things where, um, you’re put in a role. So not just underfunded, but you’re put in a role where 80% of the accounting you’re doing, doesn’t be your soul then. And, and that’s only like 25% of your job is all the accounting combined. The other 75% are all of these other duties. And when you have an, a player, a top performer, somebody excited and interested in accounting and moving the needle and making the accounting to finance better, but they don’t have the ability to function, to focus solely on just the accounting. What they find in this is what, uh, I would say underfunded with mine. Um, and what led me to leave the organization and leave nonprofit. And the way that I worked with them was that I also like UTURN a, I’m an, a player I’m a top performer. I want to be really good at what I do, what I found myself. I was mediocre and everything at best. Yep. And at the end of the day, when you day after day, year after year are, you are a high performer. You wanna grow, you wanna enhance your skills, you wanna be creative and analytical and solve these big problems and move the needle for this organization. And yet you feel like you’re just failing every day, not at failing, but failing to be great, failing to be great.

Triná Owens:

You’re, you’re just getting things done. You’re just getting things done. You’re just getting it done. You’re be, you’re producing, you know, you, um, but you wanna do something greater. Right. And you know, you have the potential to do something greater. Um, absolutely. So that’s the, yeah, that’s definitely the thing. That’s

Tosha Anderson:

To me, how, whatever we would wanna call that into, uh, or call, call the call. That specific thing. I think that that’s why at least the former finance directors like said we have five or six now on our team that left organizations for similar reasons. And those are usually a lot of the reasons. Um, and you know, that’s an unfortunate thing for the nonprofits, but I think, Hey, knowledge is power and we can at least learn from absolutely understand. Absolutely. So switching gears a little bit, there are gonna be people that are listening to this, like, wait a minute, I’m gonna counting for a nonprofit. I’m just trying to keep my head above water. Yeah. So switching gears a bit, we both mentioned, we came with an accounting background. We accepted jobs that were accounting and all other things administrative. So what was the hardest part of your multi hat job? And then looking back, what advice would you give to those that have had this position? So kind of speaking to those, you know, unicorns, the Swiss army knife, the, you know, how did you learn, what was the hardest part of your job? We’ll start with that.

Triná Owens:

Um, the hardest part and again, in multiple positions is being that other, uh, anything outside of accounting and finance I say was difficult. I’ve done some operations, I’ve looked, looked into, um, uh, having to hire someone to fix boilers, you know? Right. Um, it looked into, uh, it, uh, companies outsourcing it. I don’t know anything about it. You know, what makes a good outsourced company? I don’t know. Um, I, somehow I made it to HR and payroll. Um, again, people assume that’s finance and accounting. It is not, um, right,

Tosha Anderson:

Right.

Triná Owens:

First organization, the HR wasn’t so bad, but when I go to the next organization, they really need a HR manager. They really need a HR director and I’m, you know, part of that. So I’m that per so that’s a totally different ballgame. Um, so I would say, you know, all of those, but I guess HR would be the hardest one because I feel like that’s a really a specialized field just like accounting and finance. And yes, I understand it, but I’m not a HR. I wasn’t, I wouldn’t consider myself having a HR back ground. Um, it just kinda landed on me. And of course, like you say, how did I learn it, Mr. Google, Mr. Uh, A society of human resource management. I, you know, became a member on my own dime. Again, I wouldn’t dare, you know, ask my employer to do it, you know, on my own dime. I became a member of that and, you know, looked at their resources. So just a bunch of research on my own time, on my own dime to again, make sure that I am successful because again, I can’t fail who, you know, it doesn’t matter that I don’t know anything about HR. I have to my department and I have to run it well. And I did that. So that’s the hard part is, you know, picking up this extra, um, area and then, you know, having that ownership, I’m gonna have ownership of it and I’m, I’m gonna try my best to do my best with it. So, um, HR was definitely the hardest

Tosha Anderson:

Me too. Me too. Me too.

Triná Owens:

Hiring. Firing.

Tosha Anderson:

Yeah. And it, wasn’t just the understanding of, I, I think why accountants inherit, inherit the HR function. We have an ability to decipher details and like read super boring contracts, I guess. I don’t know, there’s this perception that we have a high attention to detail, which PS remember, everybody has said there’s 80% of accountants that are super detail focused. And there’s the other 20% of us that really like financial modeling and yeah. Geeking out on Excel spreadsheets. Uh, I’m definitely that one.

Triná Owens:

I love a spreadsheet.

Tosha Anderson:

I’d be bored in tears, dealing with enrollment forms all day long. I did a lot of that though. Um, but one of the things that I think was a biggest struggle for me, it’s not just the paper pushing that is associated with HR. What I found is I am a trained accountant and yet I am now an HR director, but I’m also working through and with programmatic team members to deal with program staff, cuz that’s most of employees, right. That aren’t even my direct reports, nobody in the organization has any understanding of the true, like, uh, appropriate process to handle performance appraisals. So performance improvement plans, you know, having those difficult conversations up to and including, uh, you know, termination and hiring. Yes. And so it was almost like, well, you’re in HR, so you have to have the difficult conversations with people or you have to fire the people and say, wait a minute, these are your staff and Triná now, you know, I mean, we run this business and we have many staff people, we, as the managers direct supervisors, we have those direct difficult conversations with our team members. Yes. So I would say it, wasn’t just getting up to speed with the, with the HR staff, but it was also working through the program team and getting everybody else’s understand, cause I’m not a train HR person either.

Triná Owens:

Exactly, exactly.

Tosha Anderson:

Getting them to understand what their role is when I really don’t know what I’m talking about either. So, um, but one thing I did learn, one thing I did learn and the advice that I would give to someone else in that position is you have to understand the really big, big red flags that can end the organization and really help water.

Triná Owens:

Yes,

Tosha Anderson:

Yes. Know what those compliance needs are. And Triná, we tell clients this all the time, everybody freaks out and thinks that they count team is what’s going to get them in big trouble. No, it’s the personnel issues. Um, whether it’s wrongful termination discrimination, failure to investigate back payroll tax issues, failure to file your, your returns

Triná Owens:

Document, document, document.

Tosha Anderson:

All of those things will be far more significant from a liability than, than what accounting could ever do. And so I tell people this all the time, don’t take the risk of combining your accounting and your HR functions. You’re two entirely, two different skill sets.

Triná Owens:

They are. They are.

Tosha Anderson:

Two different different bodies of regulatory information, two different sets of laws. Like it’s not even in the same space yet. So oftentimes it’s coupled. Um, Yeah. And that became, I would say I probably did 25% of my work in, or in accounting. Probably 50% of my work was HR.

Triná Owens:

Yep. Yep. Same. I was, I was 50, 50, well, not really 50 50, but yeah, a, a huge chunk, more HR than I was accounting at the time at, uh, when I left that position. Um, but you know, one thing, again, what I’m learning is, um, in every position I get added on a little bit, you know, you go in as one individual. Mm. And then by the time I leave, I’m three or four people and what I’m learning now, like it’s okay to say no, it’s okay to say, you know what? I can’t, I can’t do that. Or, um, not even because I can’t because I’ve succeeded. Right. I’ve figured it out. I’ve gotten it done. I’ve made sure employee files were in order. You know, I can, but I don’t feel comfortable taking on that additional responsibility. Maybe we need to figure out how to get someone and hired. Maybe we do need to outsource HR. Maybe we need, you need to outsource, you know, an additional accounting person. Right. Um, so yeah, I definitely I’m learning that. Like it, we, I have to say no, sometimes

Tosha Anderson:

Triná it’s funny. I think that the trauma that comes from this multi hat, um, I, I think speaks within our culture as a company, we are obsessive about streamlining and carving out very specific because I think we, so many of us were in roles where we had 10 different jobs and quite literal when I left my organization, um, there were at least two or three full-time hires that replace functions. So the HR, the, the actually accounting, we hired just a controller. That’s all she was doing, you know, was the accounting side. Um, but I think it’s so important and I’ve seen, and Trina you with me and seen how faster the, and, and further the business can move by streamlining these things. I, I know what many people probably thinking, oh, we use are for-profit that doesn’t make sense. And when you’re a startup business, whether you’re for-profit or non-profit, you have to be lean, you have to be resourceful.

Tosha Anderson:

I mean, the challenges are still very similar. Um, but this sooner that you pair those responsibilities down and to let people focus on the area they’re experienced in the area that feeds their soul and giving them the bandwidth and the capacity to not only do their day to day stuff, but Triná, like you were saying, like the opportunity to be creative and refine and improve what they’re already doing. I never had a moment to do that ever, uh, in you you’ve said the same thing. So yeah. So I’ve seen this trend, as I mentioned earlier of nonprofits that are quitting their accountant. So I talk with a lot of nonprofit organizations that are interested in working with us, or I’m asked to speak on different panels about, um, you know, accounting, financial management within nonprofits. So what I meant by, and I alluded to it a little bit earlier, they’re moving away from this full-time CFO role or the accountants that happens to do accounting and all other things.

Tosha Anderson:

You’re kind of moving away from that role and looking for a little bit more creative ways on, on, on handling the back office function right now. I think this is a couple different reasons. Number one, I saw a disproportionate shift in the amount of, um, uh, organizations that reached out to us that, Hey, I had a part-time CPA. This person’s no longer willing to do our work, cuz they have to scale back their work. Now the pandemic, certainly as we know, disproportionately affected women in the workforce and there were many of these women that did on nonprofit, accounting is a side gig that simply had to step away. So I saw several clients came to us for that reason. Um, then as we all know, there’s a huge talent shortage for any specialized skill accounting as no to that. So the cost of that talent has now gone up.

Tosha Anderson:

That’s now cost prohibitive to nonprofit organizations. Um, and then I think there’s also this area where people are realizing, Hey, there could be other ways we can do this to do this. Yes, yes. Trinity, what we’ve seen is a trend in organizations, instead of saying, we’re gonna hire an accountant and we’re gonna have the accountant do the accounting and all of the other things too, what we’ve seen is organizations looking for more of an operations role. So like a chief operating officer, an operations manager, um, someone that really, if you think of like, um, like a hub and spoke, like serves as the hub and then they deal with all of these spokes and get the spokes, the contract, what they need. So we’ve had clients that have now or outsourced their HR. They have now outsourced their accounting. Those really highly regulated, specialized technical skills they have contracted out. And then they have more of this operations person that’s serving as the liaison. And then they’re dealing with all the other issues that come up on site out related to facilities and those sort of things. So today, what are your thoughts on this initially? Um, I know we’ve had some clients that, that have gone this route and been successful,

Triná Owens:

Uh, abs- um, so, so far it’s been, it has been very different and I do enjoy it again, being on the other side, right. Because I’m, I’m on the other side now. And, and the path asked, I have had a negative experience with the outsource accounting and I was like, oh, you know, I don’t like it, but now that I’m on the other side so I can see, okay, how do I make this relationship successful? And so I do have a few clients that have that person that’s in the office, that operations person that’s doing the accounting and other things. And so, so one of the things that, uh, the charity CFO we pride ourselves in is becoming, is being this innovative assistant. You know what I mean? We come in with all these processes that make everything so much more efficient. Yeah. And when you talk to that person again, you’re liaison with the organization and say, you know what, we’re gonna come in here and we’re gonna help you with this.

Triná Owens:

And this is gonna make your job a million times easier, or we’re gonna handle take this off your plate. We’re gonna take this off your plate. And then you have time for that. You know, maybe you have time to do your fundraising. Maybe you have time to do more, uh, applying for more grants, you know? And so, so far I’ve seen it again, um, be very successful, very successful. And it’s, I think it’s the approach. It’s all about the approach and it’s all about again, um, letting them understand we’re there to help. We’re there to help where, you know, take those little things off their desk. And so far it’s been very, you know, um, the clients I’ve worked with have been very, very happy with this.

Tosha Anderson:

I think you bring up a good point. That reminds me of whenever I was, um, working for a nonprofit that time I ever even pondered the idea of changing something, for example, oh yeah. I wanna change payroll providers.

Tosha Anderson:

No way hard paths for me, because for me it was not just the time that I had to invest in changing the payroll provider and implementing the migrating and then yeah. And then it’s the, okay, we’re live. And then there’s gonna be the troubleshooting and the tweaking and fixing the stuff that will inevitably go wrong. Yeah. There was just no bandwidth to do that. And I think that some people think, oh, my gosh, outsourcing is creating so much work. Yeah. But where I think is outsourcing, um, which goes back to some of the things that we were talking about earlier, the very beginning of this conversation where nonprofits aren’t modern or flexible. Yes. What’s really interesting is we’ve seen organizations reach out to us, Hey, we need to be a paperless system. We wanna be a virtual team. We want something more modern. Our systems are old and outdated and, and antiquated.

Tosha Anderson:

So what contractors that we worked with, we use contractors internally ourselves too. Yes. That, and we have like a hub and spoke kind of model where we outsource different functions. And then we have people internally that deal with those contractors that you rely on the contractors to come in and say, we’ll do the updates for you. Yes. We will create the processes for you. We will even train your team members on exactly what they you need to do to get. So it removes that I don’t have time to do this implementation. I don’t have time to update things. I don’t, I don’t have the bandwidth to do that. You rely on these contractors to do that for you. And I think that that makes it a lot easier because I know that that’s one of the reasons why I just kept doing the same thing because I’ve always done it that way. I had no place to breathe when I was the CFO of a nonprofit that I wasn’t about to change anything. Cuz I can’t deal with anything breaking. No, you

Triná Owens:

Know? No. And especially once you get the people on board with a process, how hard it is to tell your organization, okay, we’re moving to this. I mean, that’s a part of it as well. And so again, we have to be very careful with how we come in in our delivery and you know, again, that’s why we’re, um, so big on assisting, like you said, we train, we will train if we need to, um, we will, you know, make this, we wanna make this process as easy as possible. And in the, in the end, I mean the organizations are usually more, a lot more efficient because we find out they’re doing things that they’ve just been doing for 20 years. Not necessarily because it’s the best way, but it’s just been done for 20 years. And so nobody thought to, um, improve it, the process at all.

Tosha Anderson:

Well, I’ll tell you, I don’t see this trend slowing down that nonprofits are quitting their accountants because of all the things that we talked about funding is always gonna be scarce and the talent is gonna continue to be expense of, um, we have an ongoing need to be modern and flexible. Yes. And technology is always changing. So, um, having a partner that you can work with, it constantly stays, uh, on the forefront of all of those emerging technologies and how things work and all those sorts of things. Um, and then just giving people space to grow and not have their departments underfunded because they’re trying to do too many things for too many people. I just don’t see this trend slowing down. No. Um, so it’s been, it’s been an interesting reflection when I saw this article and I knew you were the perfect person to talk to because I know we could share war stories back and forth.

Tosha Anderson:

Oh yes. All things were difficult for us. And I guess sadly kind of what led to us leaving, um, the industry in that way. But it’s been really cool to work with the organizations in a different way. And that’s where it’s um, I think both of us are relieved to say like, okay, we can, we can just do the accounting now. I think that’s what you said when you first came on board. You’re like, I’m just happy. I can just work on the accounting. Yes, yes. And not everything else. And so my hope is that this conversation just allows people to think about things a little bit differently and how can they be creative in solving their back office issues without facing so much of that burnout. So much of the underfunding, the so much of the we’re doing things, but I’m afraid. I don’t know what I don’t know.

Tosha Anderson:

And I’m gonna end up on the front page of the paper because I’m gonna do something wrong. That was a fear of mine. Um, yeah. Yeah. Then hire the people. There’s a lot of really great consultants out there. Not just certainly for accounting, but your HR, your it, and then consider what this hub and spoke model might look like for your organizations and how that might be helpful in succession planning and cross training. And we found it much easier to have those processes documenting and farming out these really key processes of the organization. Yes. So that when you do have turnover and you will, we all will that you’re not starting from scratch with all of these functions at

Triná Owens:

Every time. Yeah.

Tosha Anderson:

So important.

Triná Owens:

And I’ve seen that and you lose, you lose a lot when you do that. Um, that’s the other thing about having that person? That’s the Jack of all trades. Yeah. You don’t know what they did until it’s not done. And that is, you know, for a small nonprofit, a midsize nonprofit. Yeah. You know, that’s just, that’s, you know, the, I could be, have a very negative effect.

Tosha Anderson:

So Trina also part of her job, she takes on new clients and most of them are, um, transitioning away from full-time, uh, accounting hires. Um, and best scenario, we’re always transitioning from one firm to the next and that firm is still there and we can ping back and ask questions. But so often, you know, Triná, you’re dealing with situations where the finance director or whatever that role is or whatever that title is, has left. And I, I know that we go through our onboarding call and we start asking really detailed questions about four fundamental processes. Like how do we get paid from our funders? And it’s a little terrifying that they’re

Triná Owens:

They don’t know. They don’t know

Tosha Anderson:

We don’t know. Uh, we don’t know. And so diversifying those key processes, then I think the pandemic taught us that I don’t see that changing anywhere. And, and we practice what we’ve preach. We do the same thing here. I’m pretty much obsessed with it ever since I left, um, working for a nonprofit, uh, and it took a six month transition time, um, a couple hires wow. Months of training, uh, to make sure the organization can continue on without hiccups. So anyway, hopefully this was helpful for you all listening. Triná, thank you again. We’ll have you back. We’ll continue sharing some of our stories on if we know, if we knew then what we know now, how

Triná Owens:

Would we, that’s a good one. Yeah,

Tosha Anderson:

Yeah, yeah. Um, thank you again for joining me. And if you all are interested in hearing more about the work that we’re doing, go to thecharitycfo.com. We have a blog on there. We don’t just talk about accounting. In fact, I love talking about operations at the nonprofit in general. So we often have guests on there to speak about fundraising and grant writing and insurance and cyber security and all of the other areas, um, that you can possibly think of. So go check out our website until next time. Bye everybody.