Big Accounting Mistakes and Simple Solutions with Germeen Guillaume

Big Accounting Mistakes and their Simple Solutions with Germeen Guillaume

Big Accounting Mistakes and their Simple Solutions with Germeen Guillaume

by Ro

Today’s guest, Germeen Guillaume, has over 10 years of accounting experience. She joins us to share common nonprofit accounting mistakes and tips you can take today to make sure your nonprofit never becomes the next site of CSI: Accounting.

Listen to the Episode Here!

Links

Website: Visionary Accounting Group

Schedule a Call with Germeen

Timestamps

(03:18) Germeen’s accounting true crime story

(06:18) Germeen & Dolph’s favorite internal controls

(12:38) Tips to streamline your documentation

(22:54) The off-the-map question

(25:54) Controller vs CFO

Transcript

Dolph Goldenburg (00:00):

Welcome to the Successful Nonprofits Podcast. I’m your host, Dolph Goldenburg. As today’s guest states, right on her homepage, you are probably in the nonprofit sector to make an impact. But without solid accounting, that impact is just a pipe dream. Nonprofit professionals often wear many hats, and sometimes that includes the accountant hat even if you have no accounting training. So let me tell you that, if you don’t have that training, it can be a huge mistake to put that hat on. So here to discuss some common accounting mistakes and how to avoid them is Germeen Guillaume. She is the founder of Visionary Accounting Group, a virtual accounting firm that offers accounting solutions to startups and nonprofits. She has over 10 years of accounting experience, which encompasses experience as an audit manager and, my favorite, an anti-money laundering specialist.

Dolph Goldenburg (01:07):

Part of why that’s my favorite is you never think about accountants and true crime. But let me tell you, many of the best modern day crimes have been unraveled by accountants and forensic accountants. So when it comes to financial mistakes and how to avoid them, we are talking to a pro. Now you may also remember that we had Germeen on the podcast a few months ago. But we talked about diversity, equity and inclusion and things that nonprofits can do to support and promote people of color within the sector, as well as things we can do to better serve communities of color and organizations that serve them. So please join me in welcoming Germeen to the podcast. Hey, Germeen, welcome to the podcast.

Germeen Guillaume (01:55):

Hi Dolph. Thanks for having me again. I’m so glad to be back.

Dolph Goldenburg (01:59):

Oh my gosh. I am so thrilled that we got you back on. I really wanted us to have that last conversation about DEI first. But whenever I have the opportunity for us to have a skilled accountant on who really understands what nonprofits should be doing, I always want to make sure that we have that conversation, too.

Germeen Guillaume (02:18):

Thank you. Especially the note about the true crime. I grew up really, really into CSI and my Master’s is in forensic accounting. So you can probably tell I’m totally into it.

Dolph Goldenburg (02:29):

We’ve had a couple of accountants on the program. But one of them, tiffany Couch, is a forensic accountant and she wrote this amazing book called “The Thief in Your Company.” Part of what I love about this book is it’s almost like a true crime book in that each chapter tells the story of fraud, embezzlement, and waste that she uncovered. And then after telling you the story and unmasking the culprit, she explains what the type of fraud is and what internal controls could have helped you detect it.

Germeen Guillaume (03:14):

Write the name down, because that sounds like something I’d be interested in reading.

Dolph Goldenburg (03:18):

I had not originally actually planned to start off the conversation with this, but do you have any true crime or forensic stories that involve a nonprofit?

Germeen Guillaume (03:30):

I do, actually. Today we’re going to be talking about some financial mistakes that nonprofits can avoid. And one of the mistakes that I actually wanted to talk about was not implementing or enforcing internal controls. So with that being said, I’ll briefly tell you a story. I got brought in as an interim controller at a community development nonprofit because the CFO had abruptly left and the controller was on her way out, too. While working to clean up the accounting team, we actually uncovered that the prior CFO had some of the staff working on his personal business, but fronting for the organization.

Germeen Guillaume (04:16):

The organization owned multiple affordable housing apartment buildings. As we dug deeper, we found that there were all of these family members living in the housing, either not paying rent or having their rent significantly discounted. That was my very first experience. You read and hear about fraud, but it was like, “Wow, this really happens.” One of the things that I find is that nonprofits aren’t that great with implementing internal controls. And then if they do implement internal controls, they don’t enforce them. There are a couple of reasons for this. If the organization is severely short-staffed, you tend to have the same person doing a lot of the work so there’s no segregation of duties. But that leaves you open to a little bit of fraud. Other times I find that the organization is just so busy that they push it off and decide to figure it out later. And so that whole enforcing piece gets missed because it’s just not made a priority.

Dolph Goldenburg (05:32):

And I do want to say for officers of the organization, which normally include your executive director, if there are internal controls that are not being followed, your personal liability goes through the roof.

Germeen Guillaume (05:48):

Yeah. And I find that a lot of these organizations don’t have internal controls. Internal controls is one of the first areas that I tend to look at because I’m a former auditor. And so I’m really big on making sure that the proper controls are in place and that we’re not only on the front end saying that we have these controls, but that you’re also following them as well on the back end.

Dolph Goldenburg (06:18):

So can we talk about some of your favorite internal controls?

Germeen Guillaume (06:26):

Here’s one that’s so simple, but so crazy that people don’t follow it: that the right person signed the check. For example, if you are on the accounting team and you are the person that is signing the checks, you shouldn’t also have the ability to then deposit the check. It’s just about making sure that one person doesn’t have control of an entire process so that they can commit the fraud and then conceal it. Another example is making sure that the person that has that ability to access the bank account is not also the person that is writing the bank account and routing number on certain documents. Because I have seen where people have checks rerouted from the organization’s account to their personal account.

Dolph Goldenburg (07:24):

I don’t do a lot of accounting consulting because I’m not an accountant. But I once worked with an organization and there was a staff member who had signed checks to themselves in the thousands of dollars. That’s a huge red flag. And again, I don’t do a lot of accounting consulting, but I pretty much was said, “Your treasurer needs to pull the backup on every one of those checks and review it and make sure that it’s accurate. And then that person needs to know they can never sign a check to themselves. Assuming there wasn’t fraud. Because if there was fraud, you’re going to have to do something else.”

Germeen Guillaume (08:00):

Right. That’s a key control right there. So the person who has the key to the lockbox where the checks may be kept should absolutely not be the same person that can sign the check. Because then they can just go get a check and write a check to themselves. And then you’re wondering where those couple of hundreds or thousands of dollars have gone

Dolph Goldenburg (08:20):

I’ll share with you, that was a case where the treasurer did review it. There was no indication that there was any type of fraud or embezzlement or anything like that. But, you know, that was only by virtue of the fact that everybody was honest. Because that internal control did not exist, somebody could have taken thousands of dollars from the organization.

Germeen Guillaume (08:40):

And we know that these organizations can’t afford to lose it.

Dolph Goldenburg (08:43):

One of my favorite internal controls is that I believe the executive director and the board treasurer should review the bank statement every month and should initial that they’ve reviewed it. And in doing that, they should review all of the debits. You review the checks to make sure all the rules are being followed like the right person or people are signing the checks. You can also review the order of checks and make sure there are no red flags. As someone who’s been an executive director a lot, one of the reasons I love for the treasurer to be the person that also signs off with me is that’s the check and balance proving that it’s not just the ED looking at the bank statements. Because as much as I hate to admit it, it could be an executive director that’s committing fraud just as much as it could be anyone else in the organization.

Germeen Guillaume (09:57):

I am totally there with you. And that’s why checks and balances is really important.

Dolph Goldenburg (10:04):

So do you have any other favorite internal controls?

Germeen Guillaume (10:07):

This is something I don’t often see, but I wish organizations would do. And that is making sure supporting evidence, like documents and signatures, is part of the filing and documentation system. What I presume happens a lot is that, especially if you are a transaction heavy organization, sometimes things are just moving so quickly that you never go back. But one of the things that trips up nonprofits, especially those who are required to be audited, is that the auditors come in and there’s usually no supporting evidence to support the transactions that are happening. And so even if it’s really not fraud, you can’t confirm it because you just don’t have the supporting documentation to back that up. In public accounting, the saying was, “If it’s not documented, it’s not done.” That was drilled into my head. You have to be in tip top shape because you just never know what’s going to be asked or required of you.

Dolph Goldenburg (11:27):

I’ll share with you that I’ve worked with some newer organizations who have smaller budgets, $100,000 or $200,000. And they will say to me, “Well, we don’t yet really have an audit done. We just have a financial compilation done by an independent accountant. So we don’t need all this documentation yet.” And I always say to them, “It is far easier to create it now when you’re small than to not have it, suddenly hit that quarter million dollar federal funding threshold, and have a single audit and come out feeling bruised and battered because you were completely unprepared for it.”

Germeen Guillaume (12:00):

My thing is always that, if you hate audits, it’s usually because you’re not prepared. That’s usually where all the frustration and anger is.

Dolph Goldenburg (12:10):

So I have to share with you, that might be the title of this episode: If You Hate Audits, It’s Because You Weren’t Prepared.

Germeen Guillaume (12:16):

Literally. That’s what I’m finding. Because if you have your ducks in a row, the audit goes smoother. So there really is no reason to be stressed or overwhelmed. It’s usually when there’s these potential dings or not having the right documentation, and then you’re scared of what the audit report is going to say.

Dolph Goldenburg (12:38):

Can we talk about some of the ways that organizations can streamline collecting that documentation? I do think there are a lot of smaller organizations, especially if they have a lot of smaller transactions, that sometimes just start to drown in those transactions. Which is why they then don’t have the documentation they should. So what are some easier ways for organizations to make sure they’re dotting their I’s and crossing their T’s?

Germeen Guillaume (13:12):

Well for one, and this probably needs to be a larger conversation, but I think this falls back to the process. So many organizations have no policy or procedure. So much of this is relative. A large organization might not stress about documenting a $250 or $500 transaction. But for a smaller organization, that can be a big deal and is something they need extensive documentation for. So I think the first step is to identify the policy or procedure around what kind of documentation you should be keeping and where it should be held. The second thing is that so many organizations are still managing things manually, but we have to do a better job with leveraging technology. There are apps upon apps and integrations with accounting software that can now do a lot of that work for you. And so I think it’s super important to get clear on defining the needs of your organization and find a solution that can make the process more efficient.

Dolph Goldenburg (14:11):

Absolutely. And I think that if your file system is electronic, then you need a file naming system so that all files are named in a consistent manner. That way when you need a specific receipt, you can easily find it with a search function.

Germeen Guillaume (14:30):

Easy to manage, easy to find. And even to what you just said, nowadays, the software allows you to attach the receipt to the transaction. This goes back to looking at functionalities. I find that so often, even if an organization is using accounting software, they’re not maximizing it. These softwares can do all of these different things that would make the process much easier, but organizations aren’t using them.

Dolph Goldenburg (14:54):

Absolutely. I know a lot of nonprofits are using QuickBooks. And, as you said, you can actually attach all of your documentation to QuickBooks.

Germeen Guillaume (15:25):

And that’s what I’m saying. I think it’s super important because, honestly, I’ve never worked with an organization that was maximizing their accounting software before I started. It’s important to be well versed in your software so you know how to make your job less stressful and more efficient.

Dolph Goldenburg (16:01):

I would also say, nonprofits should absolutely be looking for integrations that work with their accounting software. Regardless of your software, I promise you there’s an integration where, instead of a human being having to sit down and manually enter each employees’ compensation and how it gets split among grants, you can actually have your payroll processing system automatically transfer all that over to QuickBooks. Then whoever’s managing your QuickBooks logs in, clicks a button that says “accept” after reviewing it, and it’s done. But I’m shocked at how many organizations are not yet doing that, they’re still manually entering it.

Dolph Goldenburg (16:51):

I’m also shocked at how many organizations are doing twice as much work as they should. For example, they may have 1099 contractors that they’re manually cutting checks or doing an ACH payment for. And then they have to send out the 1099s. But most payroll processing systems, for an additional fee, will also process 1099 contractors. And the same way they send W2s, they send contractors their 1099s. And suddenly it’s a click of a button instead of three days of someone’s time and bookkeeping.

Germeen Guillaume (17:24):

Yes. And I think that also goes to what also makes the organization as a whole more efficient. I’ve worked with some organizations that have huge accounting teams. But when you start to drill down into the process, you realize that sometimes a team of that size isn’t even needed because so much of what they do can be automated or streamlined. And that comes at a cost to the organization. So I think that’s why you can’t forget about the infrastructure. So if you take some time to really think about how you’re running your organization and the role that people are playing, you’ll find that you probably can save some money there.

Dolph Goldenburg (18:07):

Are there any other ways or any other systems that you really recommend people use to streamline and save some time and money?

Germeen Guillaume (18:14):

Oh yeah. QuickBooks is my favorite for now. I’m also very familiar with Blackbaud Financial Edge, but that is a really robust system. You want to look at the size of your organization and make sure that the software is applicable to you. Just speaking from the QuickBooks standpoint, there are donor CRMs that integrate with them like DonorPerfect and Neon CRM. Most of my clients are using Gusto for payroll.

Dolph Goldenburg (18:42):

This is not an ad for Gusto, but I love Gusto. Honestly, QuickBooks, ADP, and Paylocity are all expensive for a small shop. My consulting practice has a W2 employee and I’ve got some 1099 contractors. And I use Gusto. If you are a small shop, Gusto is affordable and easy to use. And like all the rest of them, the employee sets themselves up. So you set up their account and then you send them the link and they set themselves up.

Germeen Guillaume (19:09):

And with that being said, there are so many cloud based solutions that are now available to you. A lot of them are meant to help you be more efficient. You don’t want to be changing your practice every time you turn around, but you always want to keep a pulse on what is happening out there in the industry. Because there are some tech solutions that really will make your process much smoother.

Dolph Goldenburg (19:57):

And I also just have to add, in addition to your own internal cost savings, you’ll also save money with your auditor. Your auditor might be doing yours project-based. But someone at the auditing firm is breaking that down by hours. So if your auditor can do this in less time, you might pay less for your audit next year.

Germeen Guillaume (20:16):

That’s also tied to internal controls. You have to think about all of these things as you are building out your internal controls. Sometimes the mistake isn’t financial, but that mistake then has a financial consequence.

Dolph Goldenburg (20:44):

Absolutely. The other big area I think nonprofits miss out on is not leveraging the expertise of their auditor. There are so many organizations where the audit ends and everyone wipes the sweat off their brow and breathes a sigh of relief that they aren’t going to have see their auditor again for another 11 months. But I think what they fail to understand is, for example, if they get a new grant and it’s going to require a change in accounting, they could call their auditor up and say, “Hey, we’re thinking about doing it this way. What do you think?”

Germeen Guillaume (21:15):

Totally agree. And that leads me to another common mistake, which is recording data incorrectly. Nonprofit accounting is complex. You have to adhere to certain rules and regulations and make sure that you are accounting for everything correctly. This is not a knock on volunteers, but I notice that a lot of times nonprofits have volunteers in their accounting department, like volunteer bookkeepers. While volunteers can record the transactions, oftentimes the expertise is not there for deeper accounting needs. I do believe that this hinders a lot of organizations from getting grants or additional funding, because they usually cannot present their financial information in a way that really tells the story of the organization.

Dolph Goldenburg (22:30):

I could not agree more. Funders definitely have to understand how the funds they’re investing create impact for the communities they care about.

Germeen Guillaume (22:38):

Yeah. And so you really need to understand the complexity of your organization so that you’re putting the right person in the right place when it comes to hiring.

Dolph Goldenburg (22:54):

So Germeen, I want to make sure that we’ve got time for the off-the-map question. And I think I’ve got a good one for you. Like you, I’m an entrepreneur and every entrepreneur has a unique journey that brings them to the point that they say, “I’m going to take all of this risk and start my own business.” So talk to us about your unique journey into entrepreneurship.

Germeen Guillaume (23:30):

Honestly, my unique journey came on the tail of motherhood. I’m one of those people that I came into the work force ready to climb the corporate ladder. I started a blog before I had my daughter, which gave me a taste of this whole new online world and the possibilities. I only got three months off when she was born. And I was like, “Okay, this is not enough time. I want to be home more.”

Germeen Guillaume (24:16):

And so I decided to take some more time off and I chose to leave. It was through divine intervention of a family friend who knew a nonprofit that was losing their controller in a couple of weeks and was looking for someone to fill in in the interim. They wanted to know if I was available, and I figured why not? So I took that on and I never looked back; I decided this is the work that I’m going to be doing. That was my first look inside of nonprofits. And when I saw the impact that they were having in the community but their lack of internal infrastructure, I saw that I could make a difference, too.

Germeen Guillaume (25:12):

That is what really pulls at my heart strings. I figured if this nonprofit was having these problems, surely others are too. I never felt fulfilled when I was in corporate. I did a good job and had coworkers that I loved. But I never had that feeling of truly loving what I was doing until I had that job as interim controller at a nonprofit and realized how the work that I was doing directly impacted them. And so I was like, “Okay, this is the work that I’m going to continue to do.”

Dolph Goldenburg (25:54):

That’s an inspiring journey to entrepreneurship. I know you do virtual accounting support and virtual accounting. Have you done other interims since then?

Germeen Guillaume (26:07):

Yes. So essentially my services are at the controller level. I think “CFO” is becoming a buzzword. Many people think it’s so high level. But if the CFO doesn’t have the proper numbers and reports, they can’t be of service to the organization. And that’s why I chose to focus on the controller level work because I realized when I was in that interim controller role, how much was missing and not being done. And so since then, I’ve worked with maybe about 10 to 12 organizations in the virtual outsource capacity offering controller services.

Dolph Goldenburg (26:46):

So now I’m going to put us back on the map for a few minutes, because this has made me realize that I think a lot of us in the nonprofit sector confuse CFO and controller. So, Germeen, set us straight. What’s the difference?

Germeen Guillaume (27:01):

So when you think of controller, think of the chief accounting officer. It’s the person that is truly responsible for the numbers. It is the person that usually runs the accounting team and makes sure you are implementing the right controls. If you have one, it is the person that is usually responsible for liaising with your auditors. And they tend to report to the CFO. The CFO is more of the finance function, more of the planning and analysis. As time goes on and technology becomes more sophisticated, you see a lot of smudging of the roles. But the CFO is a very forward-looking position. And in a lot of ways, the CFO is the right hand to the CEO or the executive director. So they are doing that forward looking – that planning and analysis and looking at the trajectory and helping you figure out where you want to go. But they do so because of the support that they are getting from controller and the accounting team. And so I think it’s super important that you understand the different roles because you need to know what it is that your organization needs. And I find sometimes people just jump immediately to CFO, but the accounting function is in complete disarray or chaos. And so the CFO won’t be able to do much if they don’t have the right numbers floating up to them to then make those proper assumptions and planning and analysis that they use to put their head together with the executive director.

Dolph Goldenburg (28:35):

I would imagine that for a lot of organizations with budgets of $2 million or $3 million, I would imagine maybe those two roles are merged a little bit.

Germeen Guillaume (28:45):

Yes. And so that’s kind of where I live. I’m usually working with organizations that are managing a budget anywhere from $500,000 to $3 million. And so they tend to not need such a high level CFO. And so in my capacity, I do a lot of forward-looking for them. So there is a lot of getting that accounting work, that foundational work, but then saying, “What can we do to be proactive?” Because that’s the other thing. I think a lot of people think of accounting as being in the past and reactive. But accounting is also about being proactive. One thing I pride myself on in our services is being very solution-oriented and being proactive in making sure that we are taking that data and seeing what we can do to get you to X goal. What is it that your organization is trying to do and how are these numbers are going to help us figure out how we can get there?

Dolph Goldenburg (29:37):

I want to clarify that a little bit, because I can imagine a lot of our listeners are at smaller nonprofits, even under a million dollars. So I can imagine some listeners have just five or six full-time employees and they’re palming their forehead going, “Oh my gosh, we only have six employees. And now Dolph and Germeen want two of those to be CFO and controller.”

Germeen Guillaume (30:00):

Yeah. So to clarify that, I’m very honest when speaking with a client or potential client. After looking at their budget, I will let them know whether or not I think they are in a place where they need a controller or CFO. Sometimes what they need is just a basic bookkeeper. And then we go over all the things they need to make sure they are managing until the organization gets to X position. And that’s why I say it’s really important to understand where your organization is and what you need at the moment. So make sure that you are not overextending yourself, or you aren’t investing in some robust services that your organization doesn’t need at that time.

Dolph Goldenburg (30:42):

Right. I love the space that your company lives in because I think there are a lot of organizations that are not yet at the point where they need a full-time CFO or full-time controller, or even a full-time merge of those two. But what they do need is a high level of expertise. And I feel like that’s the value your company offers to smaller and medium sized nonprofits.

Germeen Guillaume (31:03):

It’s funny, you said that because that was the premise of it when I was in that interim controller role. And it was interim because they were big enough that they actually needed someone full-time. But it helped me realize that I’m all of these things that we are talking about that your organization shouldn’t miss out on just because you can’t afford a full-time person in that seat. And because of technology, I don’t need to be there. I don’t need to sit in your back office taking up space. And so we offer these high-level services at a fraction of the cost for hiring a full-time employee. But then you still get the same level of financial data and the same access to the expertise. But you’re not paying a full-time salary and benefits.

Dolph Goldenburg (31:48):

Absolutely. And I’ll share, I’ve certainly recommended to some of my clients that that’s the direction they go because they get the expertise they need without paying someone full-time to provide that expertise.

Germeen Guillaume (31:58):

Yeah. And I tell my clients, I have no problem letting you go. When I realize that you are too big for my services and you get to the point where you need someone full-time, I will be glad for you because I want you to grow if that’s what your heart desires

Dolph Goldenburg (32:15):

Exactly. They’ve graduated. It’s time for them to move on. Well, Germeen, thank you so much for joining us today. I am so happy that you’ve been able to share with our listeners some real accounting expertise to help them and their organization. And listener, if you worry you are at risk of making some accounting mistakes or not doing things efficiently when it comes time for your audit, then check out Visionary Accounting’s website at visionaryag.com. There you can learn more about Germeen’s services and even find more tips on nonprofit financial management. You can also schedule a free phone call with Germeen if you’re interested in working with her. We will have the link to schedule your call on our website, successfulnonprofits.com. Germeen, thank you again.

Germeen Guillaume (33:06):

Thank you so much for having me again.

Dolph Goldenburg (33:09):

Listeners, if you got distracted looking at your own financials to see if you could strengthen some internal controls or reporting, then head over to our website at successfulnonprofits.com. There you can get the URL for Germeen’s company, Visionary Accounting, as well as the link to schedule a free phone call with Germeen. And lastly, dear listeners, if you found today’s episode useful, then please do me a favor and share it with one other person who you think would benefit from it. It could be a friend, a family member, a colleague. That is our show for the week. I hope you have gained some insight to help your non-profit thrive in a competitive environment.

Dolph Goldenburg (34:14):

I am not an accountant or attorney and neither I nor the Goldenburg Group provide tax legal or accounting advice. This material has been provided for informational purposes only and is not intended to provide and should not be relied on for tax, legal or accounting advice. Always consult a qualified, licensed professional about such matters.

**  We have edited this transcript because how you listen is not how you read. If you have a problem with this, remember you got this for free!

Top

You're subscribed!

There was an error while trying to send your request. Please try again.

Successful Nonprofits will use the information you provide on this form to be in touch with you and to provide updates and marketing.