How to avoid an accounting emergency
Crisis – noun
A time of intense difficulty.
Disaster and crisis seem to be pervasive these days – from the fires that have burnt out of control over the past few months to the coronavirus outbreak, it is an intensely difficult time on a national and global scale.
The following discussion of accounting crises and emergencies are nowhere near that scale of course, but the general sense of gloom did lead us to muse recently on the fact that many NFPs come to us when they are in crisis.
The sudden departure of a key person within your finance team can create a major headache. The recovery process can be difficult and often requires a lot of resources and can be especially demanding on the CEO in a small-medium sized organisation.
So, today we will look at how to avoid ending up in an accounting emergency. We spoke with Accounting For Good’s CEO, Kirsten Forrester, about the best ways to prepare for the key problems non-profit organisations experience.
What causes a crisis?
Within a not for profit organisation, the human resources structure tends to be fairly lean. Very rarely are there multiple staff members in the same role or who hold the same level of authority.
Individual team members are vital to continued operations and if they depart unexpectedly it can create particularly challenging circumstances.
“A lot of the NFPs that approach us are in crisis.
Sometimes it’s a run-of-the-mill timing crisis – a key finance person has resigned, the organisation panics for a few days, contemplates the enormity of having to recruit to a role that nobody else in-house understands, so they turn to outsourcing as the best option.
We understand that this can be a difficult situation to plan for… employees often don’t divulge that they are looking for a new job, so in this instance it’s better to have a general risk management strategy already in place.
On the other hand… sometimes it can be a creeping problem – an organisation is unhappy with the performance of their finance person or team. And this can come to a head quickly with an equally quick exit.
This scenario is more of a crisis at the time, due to the speed of the exit, but it is an eventuality you can plan for by gradually working towards a change – maybe with the cooperation of your existing finance people, or in a quiet but strategic way behind the scenes.”
Risk management strategy
Organisations come under pressure when their outgoing finance person is integral to many business processes. If their departure is sudden or not well prepared, it’s likely that operations will be impacted.
Kirsten outlines a few key areas to address in the window between receiving a resignation and the staff member’s departure… or maybe even now as a risk management strategy:
- Bank – make sure at least one other person in the organisation has administrator access to ALL of your bank accounts, including term deposit, investment and credit card accounts. Sometimes there can be only one person with that access, so choose who that is with care. And if your departing employee is a regular signatory at the bank, get another two signatories registered right now as back up.
- Supplier accounts – some suppliers can be finicky about who they talk to, so make sure all the details are documented and get the handover introduction made as soon as possible. We are looking at you, phone companies and security companies! Not without good reason – you don’t want someone pretending to be you telling the security company, ‘It’s ok we’re just doing some special out of hours work.’
- ATO – our friends at the tax office fall into the category of being particular about who they will deal with, and in many cases there are limitations to how many authorised people you can assign. So, while it may not be something you can shore up in advance, it is definitely one for the pre-departure window.
- Software subscriptions – SAAS companies, especially those that hold your financial data, take security very seriously. So, if your subscription holder exits, and you don’t know the answer to their security questions for two-factor authentication (which you shouldn’t, for security reasons) there are huge hoops to jump through to get that switched over. This is something that must be handed over in that window between resignation and departure. As a precaution, have someone else in the organisation with permissions to add users and amend user permissions so you don’t get caught short and be shut out of your accounting software!
- Working papers – everyone does this a little differently so access to the finance person’s calculations and thinking is very valuable – whether it’s correct or not, understanding the thinking behind the treatment of a transaction is important in knowing what to do in the future.
- Finance/accounts email address – if this is an ‘alias’ account, set it up to divert to someone else, or if it is an actual email account, make sure the login details are known.
- Contracts – make sure the finance and administration filing is in order. Contracts are critical – suppliers, funders, employees, leases, etc. If the documents are password protected, make sure you have access to the details.
Which leads to our last point…
- Password security software – using software like LastPass or Keeper, etc to store all the admin passwords is highly beneficial. If they are associated with a generic or alias email address, then whoever has control of that email will be able to access the necessary information. But don’t forget that even password software needs to be regularly updated as changes are made… it’s important to always be on top of any edits.
Left in the lurch
What if you are left in the lurch? Don’t despair…
It is possible to pick up a set of accounts and run with it, based on past transactions and a bit of critical thinking.
It is much easier if the items above are handed over appropriately and processes are well documented, but if you engage the services of a professional team they should be able to keep your accounts running.
If you’d like to find out more about how Accounting For Good can help you avoid an accounting crisis, contact our team today.