Six Levels of Expertise

Over the years we have seen a wide variety of wonderful partnerships between volunteers and nonprofits – and a few not so wonderful.

Volunteer bookkeepers seem to be a problematic area. Maybe that’s because we also see a lot of problems with paid bookkeepers.

It could also be because some nonprofit managers think they are getting a bookkeeper when they are really getting a data entry person. Also we’ve found nonprofit managers tend to overestimate the miracles that even a knowledgeable bookkeeper can perform.

While we may be oversimplifying, we offer the following levels of most to least QuickBooks/accounting expertise. (Substitute your accounting software if not QuickBooks.)

1. CPA who specializes in nonprofit organizations and QuickBooks

2. CPA who specializes in nonprofits, but not QuickBooks

3. Accountant or CPA who specializes in areas other than nonprofits

4. Bookkeeper with QuickBooks and nonprofit experience and at least a two-year accounting degree (Such people may exist, but we have never seen them.)

5. Bookkeeper with QuickBooks and for-profit experience and at least a two-year accounting degree

6. Data entry person

Of all the people above, data entry people are the easiest to come by. They may refer to themselves as bookkeepers, though we don’t think they intend to mislead. They may also say they have QuickBooks experience, which we have often found to be irrelevant. How QuickBooks is used one place can be night and day from how it’s used somewhere else. In addition, QuickBooks is often used incorrectly.

However, given these cautions, a data entry person might be what you need. Just don’t jump to conclusions about abilities which may not be present.

Data Entry, Bookkeeper or Accountant?

What’s the difference between a data entry person, a bookkeeper and an accountant? (This is not a joke. But have you heard the one about the interesting accountant? No, us neither!)

We define a bookkeeper as someone who understands (and cares about) the impact of routine transactions on the financial statements. If a bookkeeper enters a vendor bill, for example, that person should know accounts payable will increase.

A data entry person usually has no idea what impact a particular transaction will have on the organization’s financial reports. Therefore they cannot look at the financial statements resulting from their work and tell if the information presented is correct.

An accountant is someone with at least a four-year accounting degree or a CPA who has the ability to understand and interpret a wide variety of financial transactions. They should be familiar with Generally Accepted Accounting Principles (GAAP), which are required for audited financial statements.

Accountants and bookkeepers command higher hourly fees because they are trained at a higher level and operate with greater proficiency and independence. A data entry person needs instruction on exactly what to enter and how to enter it.

A data entry person might be perfect for your organization if QuickBooks has been set up properly, enabling that person to succeed.

Don’t expect a data entry level person to be able to clean up your financial reports, which entails fixing the design of QuickBooks and often fixing erroneous accounting entries. In fact, don’t expect a data entry person to be able to produce financial reports of any kind. Also don’t expect a data entry person to keep your accounting system on track month after month, or be able to properly close out the year and produce annual financial reports.

Data Entry or Bookkeeper + Accountant or CPA

Consider supplementing the role of an in-house bookkeeper or data entry person, whether volunteer or paid, with the services of an accountant or CPA who specializes in nonprofits. You need someone with a higher level of accounting knowledge to oversee the process.

You also may need a CPA who knows QuickBooks and nonprofits to create your QuickBooks company file (Desktop or Online). QuickBooks has to be custom designed for your organization. Setting up QuickBooks includes entering correct starting numbers and deciding the most efficient ways to enter different types of transactions.

Insist on using a CPA with nonprofit and QuickBooks expertise. We’ve heard many stories over the years from clients exasperated from trying to use someone’s for-profit business accountant or someone else’s tax accountant. You really need a nonprofit specialist who also knows your accounting software!

Volunteer Options

If you have a volunteer who is doing a great job with data entry or bookkeeping, be sensitive to offering to pay for services. Perhaps the volunteer is a retired corporate bookkeeper who wants a meaningful role, but also needs to earn income to supplement other retirement income.

Volunteer services don’t have to be all or nothing. Perhaps the volunteer would be perfectly happy with a below-market rate of pay supplemented with lots of appreciation.

A Model for Bookkeeping Success

For a small to midsize nonprofit organization, one data entry person may be all you need if you have a well-designed QuickBooks company file and an external accountant to keep your accounting system on track.

Documentation of bookkeeping procedures is also important. Write down who does what and the step-by-step process for bookkeeping tasks. Bookkeeping documentation is invaluable if you have to bring in a new person. Also some transactions may be less frequent, such as stock gifts or annual special events, so it helps to document how to handle these transactions when they arise.

For more information on what makes up a successful accounting system, see our post Read This Before You Buy QuickBooks (Or Any Other Accounting Software).

We have templates for nonprofit QuickBooks company files with companion bookkeeping procedures covering common nonprofit transactions. If you are interested in a head start putting your QuickBooks in order, please contact us with your needs. Our templates help you shortcut the work of setting up QuickBooks. Then you can engage the right people at the right levels of expertise for a successful bookkeeping system. And those “right people” may include volunteers!