From the onset, Scrubbed has put processes and measures in place to operate as a 100% virtual outsourced accounting team, providing the expertise and reliability businesses expect from a professional firm. Even before the country imposed shelter in place orders, our team was prepared to work from home and provide exceptional service using cloud accounting systems demonstrating our deep SaaS accounting expertise in supporting clients remotely and efficiently.
We adopted the work from home model not only as a way to elevate our efficient and effective services, but also as a means of supporting work life balance. We did this by addressing three areas: our people, our processes, and our technologies.
Our people, through our customized trainings and continuous improvement, have adopted the cultural aspects of working remotely at home. When the shelter in place orders were announced, our team was able to maintain their stellar level of service without any downtime or learning curves.
Our processes as embedded in workflows are designed to provide mobility and agility from one location to another. For example, even before the current market upheaval happened, we had mobile home office processes for the service teams already in place. This allowed our teams to support our clients with various business lines and revenue streams.
Our investment in technologies enabled our professional staff to work and communicate with our clients anytime and anywhere. Our professional staff uses laptops with wide screens rather than office desktops. Our use of cloud technologies is central to ensure information and data security.
As social distancing was mandated, we moved 100% of the work from the office to their respective homes smoothly and without any logistical issues.
The feedback from our clients during this disruptive marketplace shutdown has been overwhelmingly positive. They say that. Scrubbed not only exceeds basic service expectations, brings valuable business development insights, but also peace of mind with their ability and agility to provide continuous professional services without any downtime despite the market shutdown.
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New Presentation and Disclosure Requirements on Contributed Nonfinancial Assets: Here’s What You Need to Know
Contributions are one of the primary sources of funds for any Not-for-Profit Organizations (NPOs) that allow them to run daily operations. Contributions, though, are not limited to cash but take the form of in-kind items such as products or services. In recent years, the accounting of in-kind contributions has been a cause for concern, with a particular focus on the valuation and disclosures surrounding them. Some instances have been identified where the valuation of in-kind contributions was overstated, leading to an inflated representation of revenue, proceeds, and program expenses, which are critical indicators of an NPO’s size and efficiency. This issue has gained the attention of stakeholders and regulatory bodies, who have demanded more detailed information on the measurement of nonfinancial assets contributed and their usage in the NPO’s programs and activities. To address this, in June 2020, the Financial Accounting Standards Board (FASB) introduced changes to the General Accepted Accounting Principles for documenting and presenting the value of in-kind contributions in the financial statements through the Accounting Standards Update (ASU) 2020-07. This ASU enhances the presentation and disclosures for contributions of nonfinancial assets or contributed services to increase credibility and transparency. ASU 2020-07 applies to any NPO that receives contributions in the form of nonfinancial assets, which includes any products or services. On the other hand, the recognition and measurement of contributed securities and other financial assets are outside the scope of this update as, more often than not, they are readily convertible to cash.You might also want to visit our Nonprofit Financial Reporting page!What Are the Changes In Reporting Contributed Nonfinancial Assets or Services? Historically, NPOs were not required to provide detailed information on the value and use of contributed nonfinancial assets in financial reports. Disclosure requirements are limited to contributed services to which no other specific disclosure requirements for contributed nonfinancial assets were enumerated. ASU 2020-07 brings the following fundamental changes and additions: Enhanced Disclosure Requirements A separate line item for contributed nonfinancial assets within the statements of activities.NPOs are now required to present contributed nonfinancial assets distinctively and can no longer be presented in the same line item as cash and other financial contributions.Disaggregated disclosures of contributed nonfinancial assetsA supporting note disclosure must disaggregate the amount of contributed nonfinancial assets to detail its composition per type (i.e., fixed assets, utilities, material, supplies, intangible assets, services, etc.).NPOs can determine the appropriate disaggregation level on the types of contributed nonfinancial assets to be disclosed. However, they must apply professional judgment in determining the needs of stakeholders, depending on the NPO’s specific activities.For each category of contributed nonfinancial assets, NPOs need to disclose the following: Qualitative information about whether the contributed nonfinancial assets were either monetized or used during the reporting period. A description of the programs and activities in which those assets were used should be disclosed.Assuming there are no donor-imposed restrictions on the usage or monetization of contributed nonfinancial assets, it is best practice for NPOs to use the asset or the proceeds from the sale of the asset to the program and activities it is intended to be used.Policy (if any) on monetizing, rather than using, contributed nonfinancial assets.Although an NPO may have a policy of monetizing contributed nonfinancial assets, it must consider any donor-imposed restrictions on the usage or disposal of these assets. When monetizing commodities immediately after donation, it should also assess whether it acts as a principal or agent in the transaction to determine proper recognition of gross revenue with the cost of goods sold or only net proceeds.Description of any donor-imposed restrictions associated with the contributed nonfinancial assets.The update requires the disclosures of any donor-imposed restrictions on contributed nonfinancial assets. These restrictions can often affect the valuation as they can impose limitations in using these assets in the best possible scenario (i.e., selling rather than using).Description of the valuation techniques and inputs used to arrive at a fair value measure at initial recognition.Contributed nonfinancial assets are reported at fair value when received. NPOs must follow the guidance of ASC 820-10-50-2(bbb)1, which requires disclosures of valuation techniques, inputs used in fair value measurement, and any changes in either or both of the valuation approach and the valuation technique, including the reasons for the changes.ASC820 provides details steps in fair value measurement that NPOs should follow according to the type of contributed nonfinancial assets. It also describes three approaches for determining fair value. An NPO must use fair value techniques consistent with these approaches – market approach, cost approach, or income approach.NPOs might find identifying publicly available inputs to fair value measurements challenging. At these times, NPOs must make reasonable, fair value estimates by referring to active market transactions.There may be instances where an exact match of contributed nonfinancial assets is not observable in an active market. In these cases, NPOs should make reasonable adjustments to the active market prices to better present the valuation of the contributed nonfinancial asset. NPOs should ensure it uses multiple reference prices and that these references are current, actual, and made in an arms-length transaction under a stable financial condition or economy.The principal or most advantageous market used to arrive at a fair value measure if it is a market in which an NPO is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets.The update defines a “Principal Market” as the market with the greatest volume and level of activity for the asset or liability, while it refers “Most Advantageous Market” to the market that maximizes the amount that would be received to sell the asset or minimizes the amount that would be paid to transfer the liability, after taking into account transaction costs and transportation costs.In the process of valuation, should an NPO uses a principal or most advantageous market in which the NPO is prohibited by a donor-imposed restriction from selling or using the contributed nonfinancial assets, such fact and the details of the market used shall be disclosed.Also read: 8 Ways to Ensure Your Nonprofit Is Tax Compliant How should NPOs implement the update? To ensure compliance with the new guidance, NPOs that have not yet made the shift should disseminate the requirements to staff, especially those in accounting roles. Further, NPOs should review their contributions intake and tracking procedures to ensure they capture the required information at the level of detail needed, which may include implementing new controls on valuation and disclosures. NPOs can still apply the concept of materiality in complying with the disclosure requirements of the update. Further, NPOs can create new general ledger accounts to monitor each asset per type and valuation approach separately. As a guide, ASC 958-605-55-70 (V and W) provides illustrative examples of presentation and disclosures for contributed nonfinancial assets. NPOs are required to effect the changes retrospectively. Thus, comparative information must be revisited, and transition disclosures following ASC 250-10-50-1 must be made. When Is the Update Effective? NPOs should apply this amendment for annual periods beginning after June 15, 2021, and interim periods within annual periods beginning after June 15, 2022. NPOs have the option for early adoption.
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Money matters: How non-profit organizations can maximize impact with effective cost management
Your organization does great things, and you know that keeping a tight grip on costs and expenses is key to achieving your mission. With limited resources, non-profits like yours are constantly facing the challenge of balancing the reach and impact of their services and programs with ensuring financial stability and sustainability.The good news is, there are ways to manage costs and expenses that can help you make the most of what you’ve got. In this article, we’ll share cost management and expense control techniques that’ll empower you to better serve your mission.Check out our Nonprofit Organization Accounting pageThree must-know cost management techniquesFirst, let’s start with three critical cost management techniques every non-profit organization should be using to maximize its impact.1. BudgetingBudgeting is a big part of making sure your non-profit is financially healthy. Think of it like a map for your money—it helps you plan for the future and see where you’re at now. In the beginning, budgeting can be tedious, but it’s a game-changer with the right approach.The first step is building a budget. Budgeting looks different for every organization, but you might like to start with a ready-made template. This will provide a solid foundation you can edit and adapt to meet your needs. Be sure to include all your main revenue sources and basic expenses like personnel costs, office expenses, and travel. Start with your fixed and necessary costs—the must-haves your organization needs to function. By prioritizing these costs first, you can ensure financial viability and make informed decisions on allocating your remaining resources.Once you have a budget in place, track your expenses. You can use budget tracking software, an app, or a spreadsheet. By keeping a close eye on expenses, you can quickly identify areas where you are over or under budget.Finally, you’ll need to adjust your budget if your needs change. So, review your budget regularly and compare it to your actual expenses. This will help you see where you might need to cut back or where you can reallocate funds. From there, you can ensure you’re making the most of your resources and staying financially healthy.Also read: 8 Ways to Ensure Your Nonprofit Is Tax Compliant2. ForecastingForecasting is the process of estimating future events or conditions based on historical data and current trends, and it’s a powerful tool that non-profit organizations can use to make decisions.Start by assessing historical data. Look for past patterns and trends that give you an idea of what to expect moving forward. This information can help you make accurate projections and prepare yourself for any unexpected bumps in the road. For example, if you notice that a certain expense has been increasing over the past few years, you can anticipate that it will continue to do so in the future and plan accordingly.Forecasting is also great for identifying and mitigating risks. By projecting future costs and income, you can get a sense of potential financial risks and take steps to address them before they become a problem. For example, if your forecast suggests that revenue will be lower than anticipated, you can take action to increase fundraising or reduce expenses. Or, if you expect that a specific fee will be higher than usual, you can plan to minimize that expense or find additional sources of income.Forecasting can be a bit of a tricky process, but it’s well worth the effort. By taking the time to forecast your organization’s financial situation, you can make better budgeting and resource allocation decisions and help ensure that your organization is financially stable and equipped to have the greatest positive impact.3. Cost-benefit analysisCost-benefit analysis is a technique that evaluates the potential costs and benefits of different projects or initiatives. It’s a way to determine whether the benefits of a particular project or initiative outweigh the costs and whether it’s worth the investment of time, money, and resources.When conducting a cost-benefit analysis, consider both the monetary and non-monetary costs and benefits:Monetary costs include things like expenses, labor costs, and materials, while non-monetary costs include things like the volunteer time and effort required to complete the project or initiative.Monetary benefits include things like revenue or savings, while non-monetary benefits include things like improved community relations or increased social impact.To evaluate the potential benefit of an initiative, you’ll first need to gather data. This might involve doing research, conducting surveys, or consulting with experts. Then, you’ll need to directly compare the costs and benefits to determine whether the benefits outweigh the costs. Keep in mind that non-monetary costs and benefits can be challenging to quantify.Finally, take the time frame into account. Some benefits may be immediate, while others may be realized over a longer period. Similarly, some costs may be upfront, while others may be ongoing.Controlling your expensesIn addition to cost management, expense control is another integral aspect of financial management for non-profit organizations. It’s essential to keep expenses in check to ensure that your organization has enough resources to carry out its mission and achieve its goals.Here are a few tips to help you get a handle on your expenses:Review expenses regularly: Take a close look at where you’re spending money and ask yourself if there are any areas where you can cut back. Maybe you’re paying for subscriptions that aren’t being used, or perhaps you’re purchasing more supplies than you need. By identifying and cutting unnecessary expenses, you’ll be able to free up more resources for your organization’s mission critical activities.Negotiate with vendors: When buying goods and services, shop around to find the best deals. Vendors are often willing to adjust their prices, too. By being prepared to negotiate and clearly understanding what you need and what you’re willing to pay, you can often secure cheaper prices on the products and services you need.Evaluate outsourcing: Outsourcing can be a cost-effective way to get work done, as it allows you to access specialized expertise and resources without having to hire full-time employees. However, evaluating the costs and benefits of outsourcing different tasks or functions is essential to ensure it’s the best option for you.By reducing unnecessary expenses, negotiating with vendors, and outsourcing, you can increase your financial stability and better serve your mission.Technology and tools for money managementIf your organization is like most non-profits, you’re always looking for ways to stretch your budget as far as possible. Technology is one solution, making managing your costs and expenses easier than ever. From accounting software to expense-tracking apps, there are so many options to choose from. How do you know which ones are right for your organization?First, consider the type of tool you need. Accounting software, for example, can help you track your income and expenses, create financial reports, and even send invoices. On the other hand, expense tracking apps are great for keeping track of costs as they happen. Some apps will even help you categorize expenses and create reports.Then, think about any specific challenges you have. For example, if you’re a small organization with a limited budget, look for free or low-cost options. But if you’re a larger organization with a lot of transactions to track, you might need more robust software. In addition, consider your employees or volunteers. Are they tech-savvy? It’s important to ensure the software you choose is accessible and user friendly.As more donors and stakeholders look for transparency and accountability, some nonprofits are also beginning to explore ESG reporting services as part of their long-term strategy to enhance trust and demonstrate impact. This is something we also see with industries that rely heavily on specialized expertise, such as those seeking biotech accounting services, where compliance and transparency are essential.You might also like: 4 New Ways to Improve Your Nonprofit Financial ReportingAre you financially efficient?Even if you adopt every cost management techniques above, your non-profit may not be as financially efficient as it could be. The question begs: What does good look like? What’s a fair industry benchmark to aim for?According to CharityWatch, a charity is highly efficient when it produces a program percentage of 75 percent or more. In other words, the charity successfully balances its finances and social impact when it costs less than $25 to raise $100.Some of the top-rated charities in terms of efficiency include:CancerCareCenter for Community Change ActionConservation FundFriends of AnimalsUnboundWhat can you learn from their success? These charities share the following characteristics:Full financial transparencyGood governance, including reports that show independent accountants audited financial statementsIndependent board members, with 51 percent or more of voting board members claiming to be independentBy implementing effective financial management techniques and keeping an eye on expenses, you can optimize your resources, embrace financial transparency, and increase your efficiency.Get started todayManaging costs and expenses is crucial for non-profit organizations wanting to make the most of their resources and achieve their goals. The good news is, it’s not as complicated as it sounds.To get started, set clear financial goals, create a budget, and track your expenses regularly. And if you’re feeling overwhelmed, don’t worry. There’s a solution for that. Enter Scrubbed, your one-stop shop for all things accounting and finance.We can take care of everything from bookkeeping and tax compliance to transaction advisory services, leaving you free to focus on what really matters—running your non-profit. Plus, we work with all types of organizations across a variety of industries, so no matter what stage you’re at, we’ve got you covered. Get in touch today to learn more.
Blogs
The Beehive Episode 8 Blog: Is Your Business Leveraging Accounting Tech the Right Way?
Technology is reshaping how businesses capture and use financial information, but are companies actually getting the most from it? In this episode of The Beehive, we explore how businesses can better leverage accounting technology, from cloud-based tools like Xero to emerging AI tools, without losing sight of the irreplaceable role accountants play.Defining “Accounting Tech”To start, it’s important to clarify what “accounting tech” really means. Instead of simply referring to software, accounting tech is actually the integration of cloud-based tools, automation, and digital processes into traditional accounting. This technology allows accountants to focus less on manual data entry and more on delivering meaningful insights.From Ledgers to the CloudGone are the days of manually recording every transaction in ledgers. While accounting used to be a painstakingly manual process, with software tools today, all you have to do is click one button and everything will be accurately recorded. Technology has helped automate repetitive tasks and reduced human error, allowing for more efficient financial reporting. This shift has freed accountants to focus more on strategy than data entry.Why Accountants Still Matter in the Age of AIWith automation handling routine processes, accountants today serve as strategic partners. Some worry technology might replace accountants completely, but that isn’t exactly the case. Because while AI can generate data, it still requires professional judgment. In other words, AI and automation prove to be useful tools, but accountants remain critical for context, judgment, and compliance.The Game-Changing Role of Cloud ToolsOne of the standout tools in the industry is Xero, a cloud-based accounting solution that we use extensively at Scrubbed. From startups to established enterprises, Xero enables businesses to manage invoices, bills, and reports efficiently. Its scalability ensures it grows alongside a company, without major increases in cost, making it a smart solution for businesses at every stage.Why Listen to Episode 8In this episode of The Beehive, you’ll discover:How accounting tech has changed the way businesses record and report financesThe benefits of using cloud-based toolsWhy accountants are still essential, even with AI on the riseHow good financial management supports growth and fundraisingCommon mistakes startups make when they don’t set up their finances earlyLISTEN TO EPISODE 8