Don’t DIY Your Financials
If you are submitting grants to funders who ask for financial statements, you may be mis-representing your organization's financial outlook. Financial statements let funders take a peak into the inner workings of your organization. If you want to ensure your organization is being reflected in a positive light, you may need to engage with a nonprofit accountant sooner than later. Check out this episode to find out when is a good time.
Episode 140 | Don’t DIY Your Financials |
🔦 NONPROFIT SPOTLIGHT 🙌🏿
Tavia Wooley Pt. 4
👉🏿https://www.sjpla.org/leaders-and-nonprofits-we-work-with/the-empowerthem-collective
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🚀 RESOURCES TO HELP YOU RUN A SUCCESSFUL NONPROFIT
The Nonprofit Volunteer Program
https://www.amazon.com/Nonprofit-Volunteer-Program-Structured-Convince/dp/1733367861/
How to Validate Your Nonprofit Idea
https://fusion.amberwynn.net/product/the-nonprofit-validation-toolkit/
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Got Questions? "Ask Amber" on any of my social media platforms or email me at amber@amberwynn.net
Speaker 1 (00:00):
What's a P and L statement? What's a statement of account? How do you produce the two years of financial statements that funders ask you for when you submit a grant? This all ties into when is it time to hire an accountant? Come check me out in this episode and I'll let you know when it's time to hire an accountant.
Speaker 2 (00:21):
Welcome to On Air with Amber Wynn, where nonprofit leaders learn to fuse passion and commitment with proven business strategies to create long-term funding impact and sustainability. And now here's your host and resident, Philanthrepreneur, Amber Wynn.
Speaker 1 (00:44):
Hey fam, it's your girl. Welcome to On Air with Amber Wynn. And this week we're talking about when is it time to hire an accountant? I get this question a lot. It's like, well, we had one fundraiser and we generated probably about $5,000, or I haven't really gotten a big grant. It's been like five or $10,000, so I don't really think I need an accountant. And here's the thing.
Speaker 1 (01:09):
A nonprofit is a business, right? A nonprofit is a business with a philanthropic purpose. And so my answer to you is as soon as you start generating revenue is when you need to engage with an accountant. Because as I mentioned in the opening, a foundation may ask you for two years of financial statements. You can get that if you have QuickBooks or if you have Wave apps, you just push the little button and it says, what's the time period you want it from January 1st to December 31st, and it'll push out a P and L statement. But the thing about having an accountant is that a nonprofit accountant, and I want to specify there's a difference between just having an accountant and having a nonprofit accountant. And I've had accountants say, no, there's no difference. A nonprofit is a business. There is a difference, right? Nonprofits have certain nuances that just a regular accountant won't really understand.
Speaker 1 (02:13):
And I can tell you from personal experience, nonprofit leaders have gotten caught up because an accountant that did not have nonprofit experience didn't do things the way they were supposed to. So make sure when you engage with an accountant that is someone who has nonprofit experience. But I digress. What I was saying is once you start generating revenue, the accountant knows how to create the documents in such a way that they meet the standard of the IRS of a funder. What is that called? It's called Generally Accepted Accounting Principles. When a funder asks you for financial statements, they have to look a certain way. An accountant has been trained produce documents in a standardized way that a funder is going to be looking for. So no, you may not have hundreds of thousands of dollars in your account, but when you are producing financial statements for a funder to consider you for a grant, those documents need to look a certain way.
Speaker 1 (03:20):
The other thing is your board should be looking at your financial statements every month. Who's producing those? I may have people say, well, if we don't have any money, then it doesn't matter. We don't have anything to show. Not true. A board should be looking at the monies that have come in, the monies that have gone out and what's remaining. You'll see in the news, you'll see in the news nonprofits that the board is like, well, we didn't know what was going on. They didn't know what was going on because they weren't looking at the organization's financial statements. Every month, your accountant is responsible for putting together the financial statements that your board reviews every time they meet during their board meeting. Whether that is the p and l statement, whether it's the statement of information or the statement of account. Different financial statements tell different stories, right?
Speaker 1 (04:23):
A profit and loss statement is going to tell you what the case of your organization is over time. Whereas the statement of information, it may be a snapshot like what's happened last month this month? So an accountant and Amber Wynn is not an accountant. An accountant will be able to give your board, will be able to give. A funder will be able to give an auditor an accurate account of what your finances is, right? And again, maybe you only have $50,000 in the bank. That still is money that needs to be accounted for, right? That's money that's coming in the organization, money that's going out. And the only way that a funder will know if you have internal controls, if you are accurately managing your money, is by having these financial statements. When we come back, I'm going to talk about how to even engage with an accountant when we come back.
Speaker 1 (05:25):
If you're just starting out and have limited resources, you may be tempted to use a volunteer based model for your nonprofit funders prefer paid staff because there's more accountability and consistency. But if you want your proposal to be competitive, then having more than just volunteers who come and go is essential. Check out my building and effective nonprofit volunteer program toolkit. It provides all the essential elements of an effective nonprofit volunteer program. Things that demonstrate standardization, consistency and continuity. Learn how to develop a nonprofit volunteer program funders feel comfortable with funding. Order your copy today. Welcome back. You're On Air with Amber Wynn, and today we're talking about when's the best time to hire an accountant? Here's the thing, you can submit financial statements for a grant, and if they're raggedy, you're going to be eliminated. So an accountant's role is important for making your organization look like it is a good investment.
Speaker 1 (06:27):
How they run the numbers, how they set them up. They present you in a good light. If you don't have that background, then you could be producing a report that shows that you are at risk, right? The other thing is a nonprofit. When it hits a certain threshold in terms of a budget, they have to produce long Form 990s. If your budget is under $50,000, that's not something you have to worry about right now, all you have to submit is the postcard, the 990, the E-990. But if you are at a certain level, $300,000 or whatever, you will have to submit what's called a 990, and it's the long form. And an accountant would have to produce that. When you start really generating revenue over $250k, in some states $750,000, you will need what's called an audited financial statement. And a CPA certified public accountant is a person who would do that.
Speaker 1 (07:25):
So depending on where you are in terms of your revenue coming in, you will need to engage an accountant. What I need you to understand is at any point in your evolution as a nonprofit, you are responsible for producing financial statements that are in alignment with GAP, generally accepted accounting principles. And it's an accountant who will help you be in alignment. You don't need to have an in-house accountant. An accountant is a consultant. They have many clients. So you would engage them to do a service, a project, if you will. So if the goal is to provide two years of financial statements so that you can submit for a grant, you would engage them for that term, right? I need you to produce two years of audited statements. That's what you engage with them for. Generally speaking, nonprofits don't have in-house accountants until they hit like that million, $5 million mark.
Speaker 1 (08:28):
Because you have a diversified stream of revenue, you have a portfolio that has multiple streams of revenue, and so it would require an in-house accountant. But generally speaking, most of us are really only going to hire a nonprofit accountant during a specific time to, you may have them on a retainer so that they can produce documents for your board to review every month. You may have them on retainer so that they can submit your 990s. So it's not a position that you're going to actually have in-house, but you're going to use them as a consultant to help make sure that your financials represent your organization in a positive light. But a nonprofit accountant is really important because again, they can produce the documents that a funder's going to look for in order to determine if your organization is being ran with internal controls.
Speaker 1 (09:26):
Alright, so when we come back, we are going to look at Ask Amber. It's a part of the episode where you get to ask me your pressing questions. So when we come back, ask Amber. Most founders don't realize that they're more applicants than there is money. This fact impacts a nonprofits fundability. Nonprofit founders should administer research on their competitors, determine if their community is oversaturated, and identify their competitive advantage before they start a nonprofit. Check out how to validate your nonprofit idea, a step-by-step guide on how to administer the research you need to validate your idea before spending hundreds of hours and thousands of dollars only to struggle to fund it. Get your copy today. Welcome back. You're on air with Amber Wynn, and today we're talking about when is the perfect time to hire an accountant? And now we are at the part of the episode where you get to ask me your questions.
Speaker 1 (10:27):
Today's question comes from Shawnee. Shawnee is out of Florida. And her question's pretty simple. Should my title be CEO or executive director? So the short answer, Shawnee, is it's up to you, but I'll give you the background. Back in the nineties when life was good in Monofil from the sky, nonprofit leaders were experiencing challenges getting in front of funders, and they felt like they just didn't get the same level of respect as a for-profit CEO. So collectively, they made the decision to change their titles from executive director to CEO, chief Executive Officer because they felt like it elevated their titles, executive director, it sounded like there were other levels above them. So they chose to take on the nomenclature of Chief Executive Officer because in the nonprofit sector, the executive director is the highest ranking paid position in the nonprofit. So why wouldn't they be considered a Chief executive officer?
Speaker 1 (11:37):
So it was to level the playing field. It was to give the executive director the same type of weight, if you will, as A CEO, and it was just to acknowledge fact that they're doing the same amount, if not more type of work in that position as the for-profit. Now, here's the challenge. These executive directors took on some of that nomenclature. In the nonprofit sector, titles have meaning. So when you have a chief executive officer, then you typically have a chief financial officer, and then you also have a chief operating officer. So you have all of these chiefs right on an org chart. If you just have a CEO, but you don't have any vice presidents or you don't have any directors, it just looks like it's heavily weighted in the for-profit sector, that's the structure. You have the CEO and you've got the vice presidents, then you have the directors, then you have the managers.
Speaker 1 (12:39):
But typically in a nonprofit, you don't have all those positions because you don't have all of that money. So it gives the appearance of, so when a funder asks you for your org chart and all you have is the CEO, but you don't then have the vice presidents or the presidents or the directors or the managers, it just looks a little weird, right? The other thing that happens is nonprofits is taken over the board part. So they'll put that they're the president and CEO that is nomenclature. That belongs specifically to the for-profit. You can't have a president slash CEO in the nonprofit side because the executive director reports to the board. So it just starts to make things a little convoluted and a little wonky. The board and the for-profit is responsible for managing a trust. That's why you have trustees. Whereas the board in the nonprofit side, they're responsible for managing the whole shebang, the whole nonprofit.
Speaker 1 (13:37):
So I encourage people just to take on the title of executive director because it eliminates a lot of confusion. If you don't understand the nonprofit sector and you just start pulling things from the for-profit sector, it starts to get you tied up, messed up, confused, and it can lead to some type of legal issues. So can you have the title of CEO? You absolutely can. I'm going to recommend that you do a lot of work. Make sure that you keep the lines separate, that you understand that a title means something in the nonprofit sector. And if you're not comfortable with it, the safest thing to do is just keep the title of executive director just saying, all right. If you have questions that you'd like for me to answer, hit me up on all my socials. Send me an email at amber@amberwin.net. I'm on Facebook, I'm on Instagram, LinkedIn.
Speaker 1 (14:31):
Ask me your question and I shall answer. All right, well, now it's time for us to transition to my favorite time of the episode when I get to shine the light on the most amazing people in the universe, my nonprofit leaders and the people who serve them, my nonprofit subject matter experts, consultants. Today we're wrapping up our conversation with Tavia of EmpowerThem, and she's just going to talk to us a little bit about what she does and how she does it and how you can contact her. I'd love for my funders out there who are always wondering how they can make an impact in system change to reach out to er. So part four of Tavia Woolley and EmpowerThem.
Speaker 3 (15:26):
We have the business to business side of our work, and then we have the business to consumer. Our business to consumer is our workshop and trainings that are directly geared to our community members. And we go out and recruit and partner with other community events just to raise awareness that we offer those workshops. So we're directly training the community on systems change, how to advocate, how to engage, how to speak up in themselves. But then on the business to business side, we do work with in partnership with county departments, other larger nonprofits, funders on community collaboration, authentic community collaboration, engagement, partnership attachment, all the things that really means that we're going to be equitable partners in this work. Community has the same power and authority as a county department. Lived experience is just as valuable as PhDs, master's degrees, and all the things in between. That is our role. And so on the business side, we do work with a lot of county departments, a larger nonprofits, private foundations. So we do both business to business, business to consumer, business to community.
Speaker 1 (16:49):
And we're back. And that was the last conversation of our four-part series, speaking with the executive director of EmpowerThem Tavia Woolley. If you want to see the full episode, it's gone over to my YouTube channel, and you can see it in its entirety. And that's it for today's episode. When it's time to hire a nonprofit accountant, it's important. A nonprofit is a business. And as a business, you have to operate as such. And accountants are really important because they help to represent your organization in a fiscal light. So your financial statements are what represents your organization, and you want somebody certified and qualified to do that. So a nonprofit accountant is extremely important. If you found value in this week's episode, be sure to like, subscribe, and share the information with someone that you think it benefit for, and I hope to see you next week. But until then, make sure you take care of yourself, like you take care of your community. See you next week.
Speaker 2 (17:55):
Thanks for listening. If you enjoyed this episode, subscribe and leave a review on iTunes. Head over to www.amberwinn.next/podcast for the links and resources mentioned in today's podcast. See you next time.
