 Good morning everyone and welcome to another episode of the non-profit show. I hope you have been with us because we have just, we're just finishing up a full week with your part-time controller. A lot of times you'll hear us refer to it as YPTC and they have been joining us for non-profit Power Week. It has been riveting each and every day. We've had a different person on to dig deep into an accounting issue which might sound like a snoozer but it's been fabulous and we have learned so much and it's really been high energy so I hope you've been able to join us. Today on the hot seat for Friday Ask and Answer one of our favorites, Ellie Hume, New Bride and CPA. Welcome Julia. I appreciate love being here. Well we are excited to have you with us again. We've got a lot of great questions and we are so honored that these questions get asked and answered every Friday due to the amazing support of Blumerang, American Nonprofit Academy, your part-time controller, Bee Generous, Fundraising Academy at National University, Staffing Boutique, non-profit thought leader and the non-profit nerd. If you have missed any of these episodes they are on our archive and I just can't stress enough how amazing this week has been. Check us out on Roku, YouTube which is amazing in itself, Amazon Fire TV and Vimeo. You can also download any of this content on our new podcast the non-profit show so queue us up wherever you like to consume your podcasts. Okay Olivia from Little Rock, Arkansas writes in you ready sister? I'm ready let's roll. Okay it might be time for our small and growing non-profit to contract with a virtual accounting firm. Can you give us some guidelines on what costs to expect? So I'm not going to put specific dollars on it but I will describe a couple of different pricing models that we are familiar with in the non-profit or virtual accounting space. Okay so there are some organizations who create a fixed fee service model. Okay. Okay and they say I'm gonna give you the XYZ services for this amount of money every month period. Okay and then there's a firm like your part-time controller and we work on an hourly basis. Okay. Okay and we customize our services so that we are giving our clients what they need and what they want and you pay for the actual time that's spent doing that work. There's pluses and minuses to both. Sure. Okay on the fixed fee side what we see is often you're very limited in scope to the services that get provided. So you might have to pick from a menu of things that you think you might need and you don't really know and then it might not be as flexible when your needs change. Okay. Or there could be hidden fees in the contract that says if we do something outside of this very limited list then you incur these extra fees or that it becomes a very challenging conversation when the organization isn't responding and there can be some issues with trying to figure out what is the right fixed fee for this particular organization and that's one of the reasons why your part-time controller from the get-go went with an hourly service fee and we think that is the most fair way to serve our clients so that they pay for exactly what they received and it allows us to be flexible in the scope of services. There's a couple things that I would warn about when you're working with organizations that first of all fees are going to vary by where you're located and where the firm that is supporting you is located. Yeah. There are a lot of virtual accounting firms that offshore some of the back end support you don't have a personal relationship with those people. You're not really even sure who's working on your account but they charge you a much lower fee for someone who might be working in India versus someone who might be working in the US. Right. There also might be obviously a different cost for working in New York versus working in Arkansas where Olivia is located. Okay. So you have to be mindful that there is going to be a cost difference based on where you're located. And if you are going to go with a firm that does fixed fee services, please, please, please make sure you're very clear on what the expectation is of what they will do for that fee and what they won't do for that fee. And I'd also recommend understanding whether you're going to get a dedicated team or person to help you or if it's just whoever is available and it's a revolving door and you don't get a relationship. You don't get consistency in the person who knows what's going on in the business. So there's a lot to really consider. And so it's hard to give you cost guidelines if I don't know fully what your organization needs. But these are the two basic service types that are out there in the virtual accounting space. So nonprofits are always so caught up on, they're managing their costs, their expectations and all of that. How if you're going to go on the hourly rate, and I've got to believe this would really be a question that goes across a lot of different professions like legal and everything. How do you organize an annual budget to understand where this is going to be? Or do you see that most of your clients are pretty close to that same hour measurement every month? I mean, or are there big swings or how do you mitigate that change? The way that we deal with the situation is when we start working with an organization, we try to learn about them in the sales conversations enough to be able to take what they need, what are their pain points and how can we fix them? And because of all the experience that we have over the last 30 years, trying to help nonprofits and are able to fix them, we can estimate how much time that we think like that initial cleanup fixing will be. And then based on the size, based on what they need on an ongoing basis, we can estimate what an ongoing relationship will look like. And we always are a little bit flexible in our estimates to include seasonality within our organizations, right? There are going to be periods of time during the course of the year that activity is up and then activity is low. Then you have budget season, then you have audit season. So we put all of that into our proposal. Again, it's an estimate, but it does allow our clients to fully understand the budget. And then going forward, we're part of the finance team. So we know what the budget for finance is going to look like going forward. And we can help make sure that that's adjusted for Okay, good point. That was a good answer. I kind of hadn't worked my wheels through to that point. But yeah, duh, you would kind of know and would be able to guide on that. Okay, but I, you know, I appreciate organizations who want a fixed fee, but accounting is, in my opinion, not always a fixed fee service. And there, there are a lot of virtual accounting firms out there. And what I've seen is you pick from a menu, you check the box, I'm going to want this. But do you even know what you need and want? No, accounting professionals know what you need and want. So it's a give and take. We have to have these conversations. We have to help under them understand not only the basics of what accounting takes and how much time it takes, but also what they're going to get for their money. Well, and I got to say, Ellie, when I first met Eric Frank, the, the gentleman that started YPTC years ago, I mean, like five or six years ago, maybe even more, you know, the conversation that we had about nonprofit accounting was so different. Obviously, pre pandemic, I mean, the whole digital construct, I mean, it has changed so much in search a short period of time. This, this, this process, accounting hasn't changed. And we're still, you know, it does change in terms of regulation and government oversight, all that. But the reality is, it's really this structure of working digitally. So it's, it's a fascinating conversation to even have, I think, and to be looking at it. So well, and I'll kind of pull a little bit from what Dan was talking about yesterday with the technology. And what you just said, technology has changed the way we're able to work. And it's changed the way, in some cases, how efficient we can be with the work, right? So that's where like fixed fee sometimes isn't the right solution because or it could be the right solution. How efficient are they? What systems do they have in place to make it make it flow? And we're, we look to help our clients make their processes efficient as possible, because we want them to spend as much of their resources on the programmatic activities, and not on accounting services. So I think that's also part of a relationship you, you have with a with a virtual accounting service is understanding, what is the thought process in helping you be the best organization that you possibly can be, and use your resources appropriately to work as efficiently with the accounting services, so that you're not wasting those dollars. But actually, you know, understanding that the accounting services are super important, and you do need to invest in them at the same time. It's true. It's something, especially as we grow in the nonprofit sector. Man, it's a big issue, and it's a heavy lift for a lot of people. Okay, let's go to the next question. And you know, I love the name with health, because they're always full of drama. Name with help from Lincoln, Nebraska. If we have a virtual bookkeeper working with us, do we still need to have a different CPA firm? It seems that the bookkeeping service we use won't give us CPA information or advice. Candidly, I get frustrated by this. Okay, what say you? I say a lot about this. There's so many angles I can go in on this particular question. But first of all, let's link it back to the question we just talked about. If it's a virtual bookkeeping service, is it a limited scope in what they will do and what they won't do? If you're getting a fixed fee, maybe they don't have the flexibility. And also, I'm not a big fan of the word bookkeeper. Oh, okay. And here's in this sense of especially when you're comparing it to someone who's maybe a CFO, controller, or even a CPA. Okay, bookkeeping is the basic data entry steps for the most part of accounting. It is not the full fledged scope of services that accounting is. Okay, so if you're contracting with virtual bookkeeping services, you cannot assume that they're going to be able to answer higher level questions like a CPA controller or CFO would be able to. Okay, Yeah, I see what you're saying. And you know, when I read this question, I don't think I had moved it through. Yeah, I think coming from the other piece here is, you know, I'm not there might not be a little more clarity here that we need from our name withheld in Lincoln, Nebraska. But a CPA firm is different than a virtual accounting firm or an outsourced accounting firm in the sense that CPA firms typically provide attestation services. They're doing audit, financial statement reviews, taxes, and you want to separate the people who are doing your internal accounting with the people who are doing your external accounting. Okay, because that CPA firm who's doing the external accounting needs to be independent of the people who are doing the internal accounting. Okay, yeah. Okay, yeah, it's all making sense. Okay, now have another big point to make. Not all bookkeepers or accountants that are helping nonprofits are actually skilled in the rules of nonprofit accounting. Okay, that gives me right. Yeah. Okay. And when you're looking for someone that does have accounting skills, and I'm going to bring this up later on when we talk about the volunteer question that you asked me. They need proper skills in nonprofit accounting. And you as an organization cannot wait until the end of the year to have your CPA firm make all the adjustments to get you right for your audit. And it's management's responsibility to know the accounting rules and to implement the proper accounting rules for their organization. Now many organizations do ask their CPA firms for advice on those things. But it is not the CPA firm, the CPA firm's responsibility to inform their clients when things change. It's kind of like one of those things they do as a favor, it is not they're they're not required to teach their clients how to implement accounting guidance that's appropriate for their organization. Wow. Well, it's I can see the frustration because you're trying to navigate the nonprofit sector, which on a good day is challenging at best. And then you're trying to figure out who to get the best advice from. Given what you said in the very beginning, we need to start off with the premise that nonprofit accounting is different. It is different. Absolutely. You know, yeah, it's really it's a fascinating thing. Well, I like what you've kind of shared with us because it gives us a little bit more insight on what to maybe expect or the questions to ask. And so and I had never really thought about the bookkeeping aspect in relationship to the internal versus external. Right. I appreciate that. Well, name withheld. I hope that that gives you some a path to look at this because you need to have the best people on your team, whether they're sitting in that cubicle or they're sitting in Des Moines. I mean, it's you need to have the best thing, right? Let's go on to Noah coming to us from Portland, Oregon. Noah writes in, we need to find a new CPA for our nonprofit. Should we only contract with a, oh, this is interesting, a nonprofit specialist or will a regularly licensed CPA work? In our community, there don't seem to be a lot of nonprofit specialized accounting firms. What am I missing? That's a that's a great question. This is an excellent question. And I think it absolutely ties back to everything we've already talked about. Yes, you want to find a CPA that understands nonprofit accounting. And I'm going to give you an analogy to think about CPAs are a lot like doctors, right? We all kind of start with the basic level of education. And then we start to specialize in different areas. Okay. Okay. So you wouldn't necessarily go to the same doctor to get a physical as you would to get brain surgery. I hope not. Yeah. So you're not going to go to the same CPA to get personal tax advice versus nonprofit accounting tax advice. Okay. Or audit support. So you absolutely want to connect with CPAs that are very familiar and stay up to date with all the nonprofit accounting rules. And that is even more important when the nonprofit has government funding. Not all not all CPAs that work with nonprofits understand the rules of government fight funding. So you really need to do your homework and make sure that the firm or CPA that you're going to work with has experience and has professional development continuously learning about the things that are relevant to their client base. Yeah. I love that comment too that you just said continuing education professional development training so that they're up on the latest things because it does seem like there are always changes and nuances that are coming down the path that are pretty substantial. Absolutely. And I can tell you we have a lot of clients who they find a CPA who's willing to do their audit. They just hit the threshold. They can't afford the big guys and I get it. But they also aren't familiar with the rules that apply. And so they cannot and you're often challenged with financial staff like we just talked about who might be basic bookkeepers that don't have that higher level knowledge about nonprofit accounting. So in essence it's the blind leading the blind into a financial statement that the public is going to see because they are responsible to the public and it is not meeting the standards of audit reports that nonprofits require. And it's extremely important that they have that knowledge for sure. Awesome. Well that again I hope that helps because that's the way you phrase that and the way you kind of help us understand what to be looking for. Noah I hope this gives you some idea. I would think. I want to add one more for Noah here because he's asking also here that there doesn't seem to be a lot of nonprofits specialized accounting firms in his area. And so in the world of virtual accounting these days there are so so many options and there are a lot of CPA firms who have branched out across the country to do external accounting the way that we've branched out across the country to do the internal accounting. And if you can locate you know look for the nonprofit specialist then find out if they serve you in the state that you're in. Okay. Don't just look if they're in your area find the specialist then see if they can help you in your area. Brilliant brilliant advice and I gotta believe that as we we start talking you know we're navigating towards this digital landscape of service. So yeah I think that's brilliant. Well Noah I think you've gotten some great advice and and the best part it was free. Okay Shonda from Des Moines Iowa writes in does it ever make sense to have a volunteer bookkeeper helping us? We have a retired bookkeeper who is offered but with all the security and fraud issues we're thinking that maybe this is not a good idea. We appreciate your opinion. That's nice Shonda thank you. Let's hope we give you a good opinion. I well I'm gonna give you an honest opinion. Okay. You can decide whether it's good or bad. Okay let's hear it now I'm like what is she gonna say? Okay it depends on the volunteer. Okay if you are asking a volunteer to do something and they have the actual skill set to do the job then hooray for you. You got a volunteer to do that job okay. But a lot of people honestly who volunteer for nonprofits they want to help they want to really support the organization and sometimes you think in your head like any volunteer will do. Everybody can learn how to use QuickBooks. It's no big deal but it is a big deal and I want to go back to what I said earlier there's a big difference between somebody who's doing basic bookkeeping and someone who's guiding your organization with proper accounting and financial management. They are not the same thing okay. So the other piece of it is if you are if you do have access to a volunteer who has the right skill set and you've actually vetted the skill set just as if you were hiring that person you also want to do background checks. Okay okay good good good. Anytime you have someone involved in the financial management of the organization for security purposes you know to as an internal control it's great to make sure that you do background and credit checks. Okay and okay even if they're a volunteer. Yeah. Actually just treat them as if you were going to hire them and pay them. Yeah. What steps would you have taken if they were going to be your bookkeeper controller accountant CFO whatever you want name you want to give them if they are touching your finances you need to know that they're a trustworthy person. Check references call their past jobs treat it just as if you were hiring them and then the other step is making sure that the organization as a whole has proper internal controls on financial information and Jen talked a lot about that on Tuesday with the fraud issues and things like that it all comes down to internal controls do not give any one person the keys to the kingdom to do anything and everything with the finances it's we know that small nonprofits are running on a shoestring they're just you know everybody stretched they're all doing too many things but you got to have more than one person involved in the finances and you know just to keep a basic bare minimum level of internal controls. Yeah because you know I think of that you know the sense that oh we're saving money but ultimately you're creating more opportunity for problems and at the end of the day when you're turning over your materials to that independent you know CPA or accounting firm if they find a bunch of errors it's going to end up costing you more money so it's probably better to invest up front on some of these control things let alone the issue of fraud right I mean that that in itself was like a whole nother layer yeah just the actual performance of turning over and you used I love you know clean books yeah something that you know a CPA can look at and actually navigate and do the right thing. Yeah I was literally I was just at an event meeting some nonprofits and a lady comes up to me and she says I'm a retired special ed teacher and I'm the treasurer of my nonprofit I absolutely know nothing about how to use quick books and can you teach me and I said I had to you know I was as kind and I had a great conversation with her but in the back of my head I'm going how did this organization decide that a person that has absolutely zero accounting skills whatsoever volunteering to support the organization should be the treasurer and have all the only access to their accounting records that's that's what I see happening in this question here from Shonda is it's great if you can get a volunteer I'm not saying it's not we nonprofits do not operate without volunteers but if they don't have the skills it's okay to say you know what you're not the right person and you know the other things that we've talked about today there's a lot of special things going on in the way that nonprofits have to account for things and they might have been a bookkeeper in the past and they can do the basics but they still need to learn the nonprofit stuff so what kind of support is that organization going to give them to learn these other pieces that they might not be bringing to the table yeah wow well you know I love that you the way you and you answered this question with a lot of grace and and empathy but at the at the end of the day it just might seem like a fool's there and to to be placing all this trust but a lot of stress a lot of stress on the shoulders of that volunteer as well and absolutely you gotta be thinking about that as well well wow ellie hume cpa mba a new york director of your part-time controller i always love it when you're on your fun you you give us great things to think about and you demystify a lot of things but i think you also at the same time amplify the seriousness of this and how we really need to be you know that poor treasurer it makes me think did she get up to go to the restroom and they voted her in and back and you know i know it's like it's really and it's it's a big issue and it's something we need to be spending more time on um so thank you for being with us at the end of non-profit power week it's really been a lot of fun it's always fun to be with you julia i'm sorry we missed jared today but um i'm glad that we can answer these questions and i welcome any opportunity to get to talk to you again in the future well great you know you you uh you're just a treasurer and and everybody from yptc has been great you know before we hang up for the day or for the weekend you should say we want to make sure that we thank all of our sponsors i mean these folks have been with us from day in and day out and they've really been on this journey especially this week non-profit power week with your pride time controller who is our one of our our founding sponsors so we want to make sure that we give them a special shout out along with american non-profit academy blue meringue fundraising academy at national university be generous staffing boutique non-profit thought leader and the non-profit nerd these folks are with us on this journey ellie we are coming up on our 650th episode which is a mindblower i'm so proud of you well thanks it's it's like a crazy thing but if you've missed any of this uh of any of this week it's really been quite informative and riveting so go back onto our archives and find out what our friends at your part-time controller have had to say about a myriad of topics that at the end of the day are foundational to the strong operation of any non-profit no matter the size um ellie i hope you have a great weekend thank you you too julia thank you so much as we end this episode we want to remind ourselves our friends at yptc our viewers and our listeners to stay well so you can do well