Q&A: Secure, Paperless Nonprofit Accounting

[1] When you have paper receipts do you scan them?
Hell no. They snap a picture of them with an app like Entryless or Expensify, where they get automatically classified and synced with the accounting system.

[2] How do you have staff code and authorize expenditures and keep that info with the digital receipt?
Staff don’t need to classify transactions. That’s the job of the Finance team. What the Finance team needs is a description of the expenditure and the grant it was for, if that applies.

Staff don’t authorize expenditures, either. That’s up to the ED, who sets policy and then reviews expenditures in the accounting system or an app. Some apps (like Bill.com) and some accounting systems (like Xero) have an Authorize button for bills.

[3] How do you store all these digital bits?
In the app and/or attached to the transaction itself in the accounting system.

[4] How do you pass on the receipt, coding, and authorization to the person signing checks?
In the app & accounting system. In Xero, for example, there is an in-program authorization button for payables.

[5] If there’s fancy software that does this all, what is it and how much does it cost?
It’s not fancy software. It’s cheap and zillions of people are using it. Times have changed. Thank goodness.
Check out Entryless ($22.49/mo), Xero ($30/mo for unlimited users), Bill.com ($19.95/mo).

[6] How much server space does 7 years of “paperwork” eat up?
Servers have evolved. First of all, in most cases you’re not using your own server but that of your cloud-based app, and (a) you don’t care how much space these documents take up, and (b) they’ve got such economies of scale that the space is dirt cheap. See pricing above.

But secondly, server space is cheaper now than it has ever been. So if you run out of space, you buy more. It’s not a big deal. Certainly cheaper than renting a bigger building to store more paper files, and because no one actually does that since that idea is ridiculous, I’ll mention that it’s still cheaper than renting a storage unit for your older paper files, which plenty of people do. And it’s less risky. Paper file can be so easily damaged. Flooding, fire, mold…stuff happens.

Two final points on questions that you didn’t ask:
[7] The risks are higher when everything is on paper:
[a] The savvy cloud-based providers have redundant servers in geographic locations with different natural disaster profiles (“we here at San Andreas Cloud Services store all of your data securely in a nearby warehouse!”)
[b] Paper is easily stolen, lost, or otherwise messed with. When everything is electronic, all you have to do is revoke access when an employee leaves, for example.
[c] You’re stuck with local auditors, whether or not they’re any good, whether or not they charge competitively, plus you have to pay more for all of the shlepping they have to do for the field work. Plus the audit takes longer. Which the Board really loves. Whee! Last year for a new client we cut the timeline from “year-end” to “board presentation of the financials” from 8 months to 4 months. So having everything available paperlessly gives you more leverage to shop around, and if you live in a major metropolitan area you can get an auditor in a lower COL area and pay less but without sacrificing the level of service.

[8] And lastly – this applies only to some organizations, but in those cases, the costs are outweighed by the revenues generated in the physical space that is now freed up. What does the org get to put there, in the entire office drowning in file cabinets? Another fundraising professional, perhaps?

Attaching Receipts and Documents to the Transactions in the Accounting System

Consider:

  • the extent to which those records are organized and accessible outside of the accounting system
  • how much is at stake if a deduction is challenged
  • how easy it is to get the organization into an app like Entryless or Expensify or any one of a ton of others in which the spender snaps a photo of a receipt and sends it in for OCR and classification
  • the volume of transactions that could be material that could potentially be challenged, individually or taken as a whole
  • whether anyone is doing quality control on the data entry and needs quick access to the backup for classification
  • the likelihood of the organization to convert to a different accounting system
  • whether the organization has an annual independent audit

Our clients in the $1M-$10M range get us backup documentation for pretty much every transaction. And it comes in handy a LOT.

Which Accounting Program Should I Choose for my New Business?

 

Congratulations on your new and exciting business!
The right accounting program for you depends on what you need now and what you want later.
The three most popular ones for startups are:
QuickBooks Desktop
QuickBooks Online
Xero
In summary, if you are going to start small and grow into something quite large, go with Xero.
If you want to keep costs down in the long term and are accepting paper checks from customers, use QuickBooks Desktop as long as you can run Windows.
If you are accepting paper checks, aren’t going to grow to a 7-figure company, really need a mobile app, and don’t mind the risk of not being able to access your file when you want to, take a risk with QuickBooks Online.
~~~PROS AND CONS~~~
QuickBooks Desktop:
PRO: You only have to buy it once
PRO: Can give you detailed business intelligence on customer trends, service trends for the types of flights – this information can help you price for maximum profitability
PRO: Is the fastest of the 3 programs
PRO: If you will be accepting checks, this has a clear way of handling that
CON: If you need more than one user in the file at the same time, it can get pricey, depending on the situation
CON: Only accessible on a computer, not mobile
QuickBooks Online:
PRO: Syncs with more 3rd party apps (project management, CRM, time tracking, invoicing & payment for example)
PRO: If you will be accepting checks, this has a clear way of handling that
PRO: There’s an app which I hear is “okay.”
CON: Frequent outages
CON: The GUI slows down the whole process because somebody came up with the bright idea that all of the data entry screens should slide up and down. I hate having my time wasted.
CON: Intuit, the company that makes QuickBooks, is pushing everybody toward QuickBooks Online, but for years it has been a problematic product, and now they’re running around fixing bugs and trying to make it better.
Xero:
PRO: Syncs with the most 3rd party apps (project management, CRM, time tracking, invoicing & payment, analysis, forecasting for example)
PRO: In an all-digital environment, it saves you the most amount of time in regular bookkeeping. It pretty much handles everything automatically.
PRO: Has 2 tracking categories in comparison to 1 in QuickBooks, so if you’re going to build a large business with different locations and lines of service, it’s all clear and trackable so you can see things clearly and manage things well.
PRO: There is an **amazing** app
PRO: Once the business grows and you have people helping you, you can approve bills in the system in order to keep track of your money
PRO: They are the up-and-coming cloud-based accounting app taking the world by storm. No bugs. No outages. And getting better all the time.
CON: Doesn’t handle batches of customer paper checks very well.

What Should I Expect From My QuickBooks Trainer?

Start by sharing your business strategy and business model so your trainer can activate features that you’ll need for external and internal reporting, such as:
* bank accounts, including PayPal
* receivables
* jobs vs. customers
* customer types
* inventory features
* item specifications
* item groups
* price levels
* credit card accounts
* payables
* sales tax
* class tracking
* 1099 setup
Then learn how to pull meaningful information from your QuickBooks file and how to interpret that information and make money with that information. If your company is new, have the trainer use a sample file from your own industry to teach you. Examples are: Financial statements, aging reports, job profitability reports, Profit & Loss by business segment or location.
Next: Back-fill into the data entry that’s required to produce those reports. Sales cycle, purchasing cycle, how to do an inventory count & inventory adjustment if you have inventory. Your training should include bank feeds, information about the best 3rd party apps (if any) for you, and the massive time-saving merits of attaching files to transactions and list items.
Next learn how to check your own data with error trapping techniques. For example, if you’re using class tracking, then the Profit & Loss Unclassified report should always be empty. Undeposited Funds should never be stale; the bank reconciliation detail will show transactions that have been outstanding for too long. Stay on top of this and you’ll avoid an irate vendor who hasn’t gotten paid because the check that you wrote is sitting on someone’s desk. You’ll also avoid making a decision based on incorrect financial statements.
To put a bow on the pre-structured piece, learn best practices in backing up the file, data security.
Don’t sign on to a training without a final phase that includes trainer availability for questions that will arise as you actually use the file. You can discuss with your trainer if you want anytime availability for questions as they arise vs. weekly sessions to get the answers, and you’ll document your questions in a list as they come up.

Mobile Accounting

If you are the type of person who loves mobile apps, texting, and getting your email on your phone, then you’re in for a treat: accounting has finally come around to your smartphone.  Here are a couple of great developments you can try so you can stay on top of your numbers.

Accounting Apps

For users of QuickBooks desktop and QuickBooks Online, an app is available to help you stay on top of your accounts receivables.  You can send invoices, view and update customer information, mark an invoice paid, and check up on customers’ balances.

If you are on the Xero cloud accounting system, the Xero Touch app is comprehensive, showing a dashboard of all of your major cash account balances and allowing you to perform numerous accounting functions on your phone.   On the accounts receivable side, you can view and re-send invoices, check customer information, and view account balances.

In the Xero app, you can snap a picture of a receipt and upload it right on the spot.  This helps avoid lost receipts and decreases paper handling, plus the cool factor is high!

These apps work on the iPhone, iPad, and Android.  With QuickBooks, there is a small monthly charge after a free trial, and with Xero, the app is free with your Xero subscription.

Bank Apps

If you’re banking with a major bank, chances are “there’s an app for that.”  Downloading your banking mobile app will allow you to stay on top of balances, receive alerts, and manage your cash flow more effectively.

Payment Apps

More and more businesses are collecting customer payments via their smartphones.  You don’t even need a merchant account for some of these payment apps, like Square, PayPal, or Intuit Mobile GoPayment, but it is cheaper if you do.  If you’re not already taking credit cards, it’s an effective way to get started; your customers can pay via Visa, American Express, MasterCard, and Discover.

With many of these payment apps, you download the app, receive a reader in the mail, and are then able to swipe or key in a client’s credit card information.  You are charged by the transaction, or monthly, if you sign up for a merchant account.  Plus, you can often customize the receipts the client receives with your logo to make them look professional.

Add-on Apps

There are many other mobile apps that can increase your accounting capabilities.  Both ADP and Paychex have payroll apps for their clients.  There are numerous apps to extend many of your accounting functions, such as expense management, document management, invoicing, time-tracking, bill payment, and even work order management.

Accounting to Go

Now you have a choice with your accounting:  you can “eat here” or take it “to go.”  If we can help get you equipped as an accounting road warrior, give us a shout.

What Is Cloud Accounting?

One of the most exciting changes in the accounting industry is cloud accounting.  The concept is easy to grasp:  cloud accounting simply puts your accounting system in a private space online so that it is fully accessible to you via a browser or a secure remote connection.

Two Ways to Be in the Clouds

There are primarily two ways to have your accounting system in the cloud.  First, it can be “hosted.”  This means that the current software you are using on your desktop, such as QuickBooks or Sage, does not change.  Neither does your company file.

The only thing you do differently once it’s set up is click a different icon to start the software.  Once you log in, most everything else is the same.  There are a couple of differences in printer access, Microsoft Excel® access, and some of the other interfaces, but it’s essentially the same experience.

So if it’s the same, why would you want to move to the cloud?  Because it completely eliminates the passing back and forth of the file among you, your CPA, your bookkeeper, and anyone else that needs to update or access your accounting file.  No more restores.  No more DropBox or YouSendIt downloads.

Hosting saves a ton of time because the people you grant access to can login to your file from anywhere.

The second way to have your accounting system in the clouds is to switch to an online accounting system.  In industry jargon, this is called SaaS, which stands for Software as a Service.  Examples of online accounting systems include QuickBooks Online, Xero, Wave, and Kashoo.  These systems have fewer features and will only be right for a client with a need for a simpler accounting system.

When you switch from desktop accounting software to SaaS, it will likely require conversion, setup, and training.  It’s a major change.

Benefits

There are many benefits to moving to the cloud; here are just a few of the more common ones:

  • Anywhere, anytime access to your accounting system.  Companies with multiple locations will benefit significantly from a hosted solution.
  • No more worrying about who has what version and whether the changes the accountant made were updated or applied.  There is one central file, and multiple people can be accessing it at the same time as long as you have the right number of user licenses.
  • No more software updates that you have to apply yourself or wait for.  This is done by the hosting provider or the SaaS.
  • Tighter security for your data.  The data centers typically have multiple state-of-the-art data security controls and must pass a rigid audit, which is far more protection than any small business can afford to provide for their own data.
  • Automatic offsite backup for disaster recovery purposes.

Concerns

Clients’ two major concerns include security, which is covered above, and costs.  When it comes to costs, the most important thing to look at is return on investment.  Will the time you save be of greater value to you than the costs of hosting or moving to a SaaS?  That answer varies for each client.

Curious About the Cloud?

If we’ve piqued your curiosity about cloud accounting, please feel free to reach out so we can continue the conversation.