Accounting and Your Association
Financial reporting and analysis is a significant function that professional accountants provide to an association or not-for-profit organization. Accountants prepare financial statements according to different groups of readers’ needs, including the treasurer, president, members, bank, and government. They keep a clear track of all transactions, identify possible adjustments to the financial statements including note disclosures, and show highlights of the association’s financial performance. This financial analysis could pertain to specific areas that different readers might have more interest in. For example, membership renewal and new recruitment, conference and certification. The customized reporting and analysis will help the association set up a more realistic strategic plan and budget for the future.
Cash management is also an indispensable service that accountants provide. Associations need enough cash and reserves to fund the daily operations and the accountant monitors the cash balance and budget for cash flow. Generally speaking, associations should have at least six months’ worth of expenses in their reserve funds. The specific amount is on a case-by-case basis and may be outlined in the association’s financial policies.
The accounting team also advises the treasurer and board of directors on investment strategy. Working with an association management agency, like Managing Matters, allows for associations to benefit from their accounts having up-to-date knowledge on investment opportunities, new features with credit cards, or updated banking options.
The Canadian Revenue Agency (CRA) and the federal government reserve the right to go back seven years to audit the association’s financials and tax filing. Therefore, it’s important for associations to keep consistent and proper bookkeeping and file taxes accurately each year on time. Missing the deadline or filing the incorrect amount could result in a future penalty and interest. Accountants protect associations from the audit risk and conduct tax planning when needed.
The accountants provide insights into the strategy and governance of the association. They analyze the association’s governance policies, design the internal control system and make sure the governance structure as well as the control system work effectively and are in compliance with the association’s mission, vision and regulations. When there is a lack of internal control systems, inefficiencies can arise in the association, which can easily lead to a cash-flow issue. The accountant can help with setting up the procedure and monitoring the workflow to mitigate the risk. The effective internal control also provides extra assurance to the association’s financial health and can alleviate the burden of the annual audit. The accountant has deep insight into the day-to-day finances, whereas the treasurer has more of an overview of the association’s finances. Together, they work in tandem towards the association’s financial goals and overall stability.