As the treasurer, you have a big job and a lot of responsibilities. Don't let these mistakes keep you from accomplishing your goals for your club. Here are three mistakes we see a lot and how to avoid them.
Not Performing Bank Reconciliations on a Timely Basis
A bank reconciliation compares transactions in your accounting records against your monthly bank statement. It is a somewhat easy task to complete if it's performed promptly each month.
A monthly reconciliation helps you:
1. Keep track of how much money you really have available in your bank account against which future checks can be written.
2. Catch errors accidentally made when recording information in the checkbook ledger or that the bank may have made.
3. Make sure that all the transactions have been entered in your ledger accounts.
4. Detect any fraudulent activity happening on your account such as any unauthorized checks, withdrawals or transfers being made out of the account.
5. Identify old items in need of additional research like old outstanding checks that have not yet cleared the bank.
Closing Accounting Books in Error or Prematurely
At the end of each fiscal year, it is necessary to perform the year end closefor the accounting books. As a result of the year end close procedure, each income and expense ledger account will be reset to zero so that each will begin the new year with a zero balance.
Some treasurers make the mistake of closing the year in error(ie. any time other than year-end). If the books are closed by accident, say mid-year, then you will only have partial year financials for the transactions that have occurred to date and not a complete financial record for the full year.
The other year-end closing mistake treasurers make, is performing the year end close too early. You do NOT want to complete your year-end close until after you’ve finished entering ALL transactions for the entire current fiscal year. Once the accounting books are closed, you cannot reverse the process and all new entries will be tagged to the new fiscal year. For example, if you issued a check in the previous fiscal year but forgot to record it prior to closing the accounting books, the check (expense) will need to be entered in the new fiscal year’s ledger accounts. This will cause the current year’s financials to be misrepresented with an expense that took place in the prior year.
Remember, the balances in the ledger accounts will be reset to zero upon closing, so it is very important to make sure to print or download all the financial reports for the fiscal year prior to closing. It is recommended to print Budget vs Actuals, Income & Expense report (in detail), and the 990-EZ information report.
Not Understanding the Difference Between Different Types of Accounts
To begin setting up an accounting system, the very first thing that needs to take place is the creation of a chart of accounts. The chart of accounts is a listing of the accounts that are used for recording transactions into the general ledger .In order to be set up correctly, it is important to understand the different types of accounts included on a chart of accounts.
There are four main types of accounts: assets, liabilities, income, and expenses.
These are the accounts that the organization owns that have value. Examples of assets are cash, checking account, savings or money market account, PayPal account, petty cash, or undeposited funds. Assets that a business owns can also include computers, land, buildings, vehicles, equipment, and inventory.
These are the company’s financial obligations or the money the business owes to others. Examples of a liabilities are accounts payable, and money collected that is owed to someone else like sales tax due or membership dues.
This is the money the organization earns from selling its products or services. Examples of income are money received for events or fundraising, donations, money from the sale of school supplies, spirit wear, interest income or fees charged.
This is money the organization spends in order to produce the goods or services that it sells. Examples are the cost to purchase supplies or spirit wear, or expenditures the company makes in order to operate like rent, office supplies, utilities, repairs and salaries. The chart of accounts is the cornerstone of the accounting system. By taking the time to setup the accounts in the correct category, you will facilitate the financial record-keeping of the organization.
The job you do as treasurer for your club is invaluable and more often than not, a volunteer position. These quick tips will help keep you headed in the right direction, and once put in place, can help to ease any transition you may have in the treasurer position.