Today's nonprofit world is characterized by greater competition for funding and increased scrutiny of your impact. This is sometimes due to fraud or poor performance of just a few nonprofits, which affect the whole.
Whatever the case, this represents an opportunity for your nonprofit to be transparent, to demonstrate accountability and to strengthen your reputation with funders and the community. And one way to do so is for your financials to be "audit ready" so that you can prove financial health and how you are investing funds in your mission, even if you are not audited.
How can you be audit-ready in a way that enables your nonprofit but doesn't hurt your Return on Mission? Investing in the right nonprofit accounting software is central to the answer.
Financial Statement Audit Process
Here's how the financial statement audit process works for nonprofits:
- Primary Risk Assessment: judgement and estimates
- Controls Testing: Accounting, reporting process, effectiveness of controls
- Controls Testing Results: determine level of substantive testing
- Substantive Testing: check calculations, examining records and source docs, ensure balances and transactions are supported
The Key to Audit Readiness: having well-documented transactions and balances.
To ensure the most effective audit, you will want to trace all transactions from the financial statements to the GL to the sub-ledger to supporting documents, and back again.
Trying to achieve this with QuickBooks, legacy nonprofit software and/or Excel spreadsheets is extremely difficult. Alternatively, all of the above can be automated with nonprofit cloud accounting technology, reducing manual processing errors, time needed for the audit and the time needed for your financial close.
Three Keys to Automation
How do you know which cloud accounting software can help you automate the audit-ready process? We recommend that you look for the following:
- Accuracy: covering funds, programs, restrictions, and grants
- Audit Trail: easily tracing all transactions, drilling down to supporting documents, and viewing accounting and reporting processes
- Cloud: anytime, anywhere access, read-only access for auditors, real-time drill-downs, and self-service reports – all paperless
Sage Intacct for Nonprofits
Sage Intacct is cloud accounting software for nonprofits that excels in fund accounting, grant management and other nonprofit accounting needs. Sage Intacct also helps automate your nonprofit's being "audit ready" so that your audit is efficient, costs are kept to a minimum and you get a satisfactory result. Contact us to learn more about Sage Intacct and becoming audit-ready.