A Checklist for a Smooth Fiscal Year-End for Your Nonprofit

There is a shadow lurking behind all the excitement around your next big event. Something is looming behind your next major campaign. Among all buzz that goes along with the execution of your nonprofit’s financial strategy, there is still one critical thing every organization must prepare for—the fiscal year-end audit.

While the term ‘audit’ might strike fear into even the most seasoned of finance departments, the process doesn’t have to be a frightening one. If you approach the fiscal year-end and audit with a game plan, you can turn the entire process from a nightmare to a breeze.

In this guide, you’ll get a checklist to help you focus on the key tasks your nonprofit finance team should do to make sure you have a smooth fiscal year-end, preparing you for a smooth and successful audit.

Make a Schedule for Your Fiscal Audit—and Everything Around It

Even though the year-end closing is one of the most important financial responsibilities of any nonprofit finance team, its approach does not mean there aren’t other responsibilities still occurring. Most fiscal year ends also coincide with month and quarter ends, tripling the responsibilities of your finance team.

By making a schedule of upcoming responsibilities—such as finalizing payroll, inputting data like donations and payments, and posting journal entries—the finance team can ensure that no due dates or other tasks are missed and can even utilize the schedule to delegate tasks across the team. By using a shared calendar application or a project management tool like Trello or Asana, you can make sure the whole team is up to date on all finished and upcoming tasks.

Gather All Your Nonprofit’s Financial Statements

Gathering your statements is actually a step we’ll mention twice. Pulling these reports at the beginning of your fiscal year-end journey can help you get a feel of where you stand now and guide you toward the most pressing tasks on your checklist. By starting with your statements, you can look for any existing discrepancies, and tackle them head-on before they cause issues moving forward. If you gather the statements from the previous year/month as well, they will give you a good starting point with what you already know to be correct.

Some good financial statements to start with:

  • Income Statements
  • Balance Sheets
  • Bank and Credit Card Statements
  • Payroll reports

Once you’ve run your reports and pulled all of your data into one place for easy access, the real fun can begin.

Collect Any Outstanding Items

All outstanding items—such as invoices and receipts—are necessary to properly close your books, so these will need to be gathered from your vendors and employees and anyone else with an outstanding record. To ensure everything is submitted correctly, make sure to give everyone a thorough understanding of what’s needed. Remember, it’s human nature to procrastinate sometimes, so setting your collection as one of your first items helps to avoid significant delays in getting everything.

Consider letting your financial software help in your collections as well. Fund accounting software often allows users to set up dashboards for tracking what items are still outstanding. You can use the system to also keep tabs on the flow of submitted items, such as receipts and invoices, or encourage users to upload the files themselves. Using these functionalities will smooth the process of ensuring all items are up to date before closing your books.

Close Out and Accrue Your AP and AR Accounts

Closing out your major accounts helps you gather an understanding of the organization’s financial situation, even before final financial statements are pulled. Making sure that these accounts accurately reflect real-world happenings also helps to ensure no surprises come audit time. If you do end up with any balance, make sure to create new adjusting journals to reflect the appropriate transactions.

If you have any unpaid debts in your close out, make sure to list them as liabilities when preparing the Balance Sheet. For any receivables that have been left unpaid, add these as debits to the balance sheet (and credits to the income statement) to ensure you start the next fiscal year on the right foot.

Reconcile Your Nonprofit’s Treasury Accounts

Reconciling your bank and credit card accounts goes hand-in-hand with closing your AP and AR accounts. These steps help you to keep your financial software in line with any statements from your bank and keep things in order with the real world. Take advantage of expense management tools in your financial software, such as integrated credit card feeds, to simplify this process.

Gather All Your Nonprofit’s Financial Statements (Reprise)

You’ve run through your books and sorted all the outstanding items. Now is the time to re-run your statements, ensure all transactions have been logged and show on your reports, and prepare them for both your board and auditors based on any specifications they’ve given you. A good list of statements to pull would include:

  • Income Statements
  • Balance Sheets
  • Payroll Reports
  • Retained Earnings Reports
  • Cash Flow Statements

Present the Reports to Your Board

Presenting to your board may typically be done post-audit, but it never hurts to loop them in after your year-end close-out to ensure the entire organization is on the same page going into your audit cycle. Plan to give your Board a full rundown of your current financial statements, such as total revenue, expenditures, and budget forecasting, to help get everyone at the organization prepared for the coming audit. Create a story with your data through visualizations and summary pages to help your leadership see the entire financial picture.

Take the Stress Out of Your Annual Audit

With a checklist in hand, the upcoming fiscal year audit will be a much easier process. Having set tasks and timelines will allow for your organization to not only ensure the process is completed easily and efficiently, but also reduce the stress on you, your team, and the organization as a whole. It will also give you time to focus on other upcoming projects like major events or campaigns, allowing for your organizational mission to be your center of attention—rather than just focusing on an end of year audit.

To see how to use your software to make your audit easier, watch Streamlining Your Audit with Blackbaud Financial Edge NXT®.

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