Introducing the Chart of Accounts (COA) - the foundational accounting tool every nonprofit leader needs to get right for maximum financial insight and awareness. It’s a critical element to your financial operations.
 
A clean chart of accounts promotes organizational sustainability and high performance.
 
Accurate data empowers organizations to:

• Have meaningful financial conversations
• Eliminate uncertainty as to financial positions
• Guide decision making
• Provide clarity on organizational health
• Generate data for grant applications
• Build a financial case for fundraising initiatives
• Encourage financial transparency (donors respond well to transparency)
• And so much more…

 
When our team brings on a new client, we review their chart of accounts right away and provide recommendations for improvement as needed. It’s just that important.
 
So, let’s dive in and learn a bit more! 

A chart of accounts (COA) is a standard accounting index system that helps nonprofit organizations classify and track their financial activity. It’s the backbone of the financial data that populates other financial reports. The COA organizes transactions into digestible information that gives nonprofit leaders a clear view of their organization’s financial status. For nonprofits, the chart of accounts is typically broken down into five sections: assets, liabilities, equity, income, and expenses.
 

• ASSETS [WHAT YOU OWN]: cash, inventory, fixed assets, accounts receivable, prepaid expenses, investments
• LIABILITIES [WHAT YOU OWE]: accounts payable, short or long-term debt, payroll taxes, deferred revenue
• EQUITY [WHAT YOU’RE WORTH]: retained earnings, unrestricted assets, temporarily or permanently restricted net assets
• INCOME [WHAT YOU RECEIVE]: contributions, pledges, grants, revenue, investment income
• EXPENSES [WHAT YOU SPEND]: office supplies, salaries, printing costs, bills, rent, purchase orders

 
Keep in mind that the list above is not exclusive. If you’d like to see the all-encompassing chart of accounts, refer to the Unified Chart of Accounts (UCOA). This was designed for nonprofits with every possible account included, and it mirrors categories on the IRS Form 990.
 
Do we recommend copying the UCOA? Nope! It makes more sense to design your chart of accounts to reflect your organization's exact needs. Keep it as clean and simple as possible. 

Put on your logical thinking hat, step number one!
 
As we mentioned above, there are five recommended categories for a nonprofit's chart of accounts: assets, liabilities, equity, income, and expense. Each category should be assigned a specific number sequence to conform to best practice. 
 
Here’s a standard chart of accounts numbering designation for nonprofits:
 
Assets – 1000
Liabilities – 2000
Equity – 3000
Income – 4000
Expense – 5000+
 
These numbers will serve as the headers for your chart of accounts. Individual accounts will be broken down and classified within each category using corresponding number sequencing. For example, the accounts within the income category might have subcategories like this:
 
Individual/Small Business Contributions – 4010
Corporate Contributions – 4020
Legacy and Bequests – 4070
Uncollected Pledges – Estimated - 4075
Foundation/Trust Grants - 4230
Federal Grants - 4520
 
This is a basic example. The standard chart of accounts we start with at Blue Fox contains just over 100 line items and includes sub headers to group similar accounts.
 
We encourage nonprofits to keep their COA simple (we call it “natural”) while still segmenting data enough that it delivers meaningful information for future decision-making.
 
Here is some other Blue Fox chart of account best practices for nonprofits:

• As shown above, always number your accounts (not everyone does this)
  • Why? Because software like QuickBooks tends to organize reports based on alphabetical account names if there are no account numbers in use. This can be a more confusing, or at least, less meaningful way to organize the data.
• Header accounts should never have a balance in reports
• Special events should have their own section for both revenue and expenses for nonprofits
• Account titles should be as unique as possible
• Generally, accounts should line up to the income and expenses as listed on the 990
• Keep in mind that the COA ultimately must work for management
• Note of caution: if you're leaning too much toward what people want to see, your COA may not be natural, and you run the risk of not fully leveraging other tools in QuickBooks for additional dimensionality
  • Example: if the board wants to see subaccounts under Salaries & Wages on the P&L that show everyone’s individual pay, that is not the correct approach. Over time and with staff turnover, you could easily have dozens and dozens of subaccounts which make reports excessively long and complicated
• If you choose to revise your COA, be sure to create a roadmap of sorts for your tax/audit team so that they understand the changes you’ve made and why

 
If you have any questions about revamping your nonprofit’s chart of accounts, our friendly team is happy to help!
​Give us a shout, and we'll get you sorted.

Pay off this loan as soon as comfortably possible for your organization to avoid a loan maturity balloon payment! At the least pay the accruing interest on a regular basis.
​
 HERE'S WHY:

• Although loan payments are deferred for 30 months as of March 2022, interest is still accruing daily. The documents you find on your account at caweb.sba.gov will show you the daily interest accruing.
• If you don't make a payment during the 30-month deferral period, and you only make regular monthly payments for the full 30 years of the loan, you will have a sizeable balloon payment at the end of the loan!

Hi Client That We Love,
 
Jina and Randi looped me in on your recent discussion regarding covering medical travel and abortion travel. I understand you all will speak with your health insurance advisors on this, which is a good next step.
 
I suggest that you speak to your general counsel/corporate attorney as well because, depending on how this unfolds, there could be an additional risk to employers who want to offer this kind of support if the structure of the reimbursement doesn’t line up with the current guidance in the code regarding medical reimbursements.
 
Here’s a brief overview of some considerations. What we’re probably looking at to keep employer risk as low as possible is the setup of a Health Reimbursement Account (HRA) with clearly outlined policies on what types of expenses will be covered. This would answer potential questions from employees like:
 

• If her abortion travel is covered, can my facelift be covered? (That’s a crazy example but just saying the crazy stuff is what we have to solve for as employers sometimes… )
• Does the abortion have to be medically necessary to cover the travel? (The answer will determine if an employee could ask for travel coverage for any elective procedure.)

 
I just wanted to add this additional insight in case it’s helpful.
The lawyers on both sides will have a field day with this…
 
Suppose Congress supports the Court’s decision to overturn Roe v. Wade and puts pressure on the Treasury. In that case, we may even be looking at a future where employers who choose to cover abortion travel will be subject to an audit of their fringe and health benefits more regularly. (Think: the travel benefit is set up as non-taxable, and because proper plan documents or policies aren’t in place, the IRS claws it all back and makes it taxable to the employer and employee. Then adds penalties, fines, and interest.)
 
For all these reasons, I strongly suggest legal guidance before proceeding.

Let me know if you want to talk this through more.

Chantal

NOTE: Blue Fox is an advisory and financial consulting firm, not a law firm or a public accounting firm. Any anecdotal advice shared here should not be relied upon for decision-making. Please consult a CPA, attorney, or other qualified professional before making changes to any benefits policy.

There’s something stinky in the air lately.
It smells like past payroll mistakes.
And it takes a while to clean up.
 
Here’s the reality: you want a badass bookkeeper, not a BAD bookkeeper! 

Nonprofit bookkeepers must understand nonprofit payroll and tax compliance. If they don’t, preparers beware.
 
Our accounting team has been cleaning up many stinky payroll messes lately. The kind of messes that only come to light during W-2/1099 time. And many of which started with a tiny mistake years ago that snowballed into a significant issue.
 
So, we thought we would share a few examples to help other nonprofits keep their books and payroll tax situation clean and avoid the cost and totally unnecessary stress of rework. 

HE MISTAKE: This is a common mistake with the rise of a virtual workforce. If an employee’s work location (the state they physically work in) is not recorded correctly within the payroll system, the payroll provider will not withhold state income taxes properly. Payroll taxes must be paid and withheld based on the state that an employee works in, NOT the state where their employer is located. This mistake is typically caught when employees receive their W-2s.

THE FIX: The employer will need to create a new W-2 and amend all previous quarterly state (and local, where applicable) tax returns to correct the issue. This is a HUGE headache and may result in many penalties and fees.
 
HOW TO PREVENT IT: In the payroll system, ensure all remote employees have a work location that reflects their physical location.  ​

THE MISTAKE: Companies that switch from one payroll processor to another in the middle of the year, beware. Often, some historic or employee data isn't properly transferred to the new provider. This causes (1) incorrect filing of payroll forms (federal and state) for the period this occurred, (2) errors related to benefits and deductions like retirement balances, unemployment compensation, and workers comp. This mistake is not typically noticed until year-end when W-2 forms are prepared or when the IRS/state sends the notice. IRS penalties can occur.
 
THE FIX:  Audit the data transfer between payroll providers to determine what went wrong. Then ensure the new provider has completed and corrected information before issuing W-2s.
 
HOW TO PREVENT IT: Follow this Switching Payroll Providers Checklist and carefully compare prior employee records/paychecks to current ones after a payroll transition to ensure data accuracy.

THE MISTAKE: Payroll tax returns never get filed in the hustle and bustle of running a nonprofit organization. Typically, the IRS will send notice, and penalties apply. If there was turnover in the payroll administrator position, it would likely take some digging to figure out what was filed and what was not.
 
THE FIX: Pay penalties and backfile tax returns. This is a nightmare from an administrative standpoint.
 
HOW TO PREVENT IT: Hire a professional accounting firm (like us) to manage payroll, follow payroll tax and compliance deadlines, and properly prepare your payroll tax returns.

THE MISTAKE: Someone with a lack of training in payroll taxes is responsible for the task. There is no reconciliation process, so payroll taxes are paid in the wrong amount.  It can take up to a year to notice this mistake when the IRS sends notice and penalties.
 
THE FIX: Pay penalties, recalculate payroll taxes, and pay the correct amount.
 
HOW TO PREVENT IT: Hire a professional accounting firm (like us) to manage payroll, follow payroll tax and compliance deadlines, and properly prepare your payroll tax returns.

Are you surprised by some of these examples?
 
Some of the preventative tips seem obvious, right?! File your taxes on time, pay the correct payroll tax, etc.
 
It's easy to imagine how seemingly "small" things like this can get missed. Nonprofit leaders are stretched thinner and thinner these days with, you know, ALL THE THINGS like:

• A global pandemic
• Virtual workplaces challenges
• National workforce shortages
• Lack of financial expertise on staff
• Constant tax law changes
• New technology options
• Demand for virtual services
• And the list goes on…

 
Nonprofit leaders need to know that they are not alone in feeling overwhelmed by financial management. Deep financial knowledge and expertise are not typically found in-house in the nonprofit sector, especially in organizations with budgets between $1-5 million.
 
This is why Blue Fox exists. To lighten the nonprofit manager's load. To educate and serve nonprofits and social enterprises on all things financial management. We tell our clients that we’ll handle the stuff that keeps them up at night.
 
If your organization struggles with payroll and tax compliance issues, give our friendly team a shout.
 
We’ll get you sorted!

Our team at Blue Fox put our heads together to develop this free resource and we think it's the most comprehensive guide to switching payroll companies on the web. This is the exact guide we use to onboard our nonprofit payroll clients at Blue Fox. 

Here are some of questions this guide will answer for you: 

• What is the best time to change payroll providers? 
• Can I change payroll providers mid-year? 
• What types of new services do payroll companies offer these days? 
• What documentation should I start pulling together? 
• What should I do first? 
• How can I make sure my employees are paid on time? 
• How can I avoid mistakes and future tax/compliance headaches?
• Are there companies that specialize in nonprofit payroll? (Yes, that's us!)

As you can probably gather, our team at Blue Fox specializes in accounting and back-office services for nonprofits and social enterprises. But this checklist is designed to help small businesses as well. We're super inclusive:) Everyone is welcome to download and use this resource! 

If you have any questions, please reach out. Our friendly team of nonprofit financial gurus are happy to help, and we'd be delighted to offer our services to your social impact organization! We support our clients with a unique mix of high-touch customer service and best-of-breed technology.  Give us a shout anytime at (321) 233-3311 or hello@yourbluefox.com

That one rock caused a multi-dimensional change to its environment.
 
This Earth Day, imagine what we could achieve if every human on earth completed one act of goodness today. We would influence real positive change on our planet.

So, we challenge you to take action in whichever way feels best! 

Pick up a stone, drop it into the water, and watch the ripples of care spread outward, upward, sideways, diagonal, and deep into humanity.  
 
As you may know, conservation organizations hold a special place in our hearts. We highly recommend our clients if you’re looking for an organization to support this Earth Day.

• CREW Land & Water Trust
• Together Bay Area
• WattTime (their Founder’s recent Ted Talk will blow your mind)

Melbourne, FL (April 13, 2022) – In late 2020, the Melbourne Regional Chamber began planning the launch of a Diversity, Equity, and Inclusion (DEI) Committee and invited Blue Fox CEO Chantal Sheehan to serve as a founding member (and subsequently as an investor).
 
Chamber Vice President of Business Development Mel Thomas said, “Chantal’s leadership style, professionalism, and operation of her organization made her an instant candidate to serve on the MRC’s DEI Committee. We are so honored that she not only accepted the invitation to serve but has been a force for driving those conversations and programs both internally and externally, as well as a financial supporter of our Professional Equity Sponsorship program for underserved business partners.”

​Even I can be surprised sometimes.
 
Recently, I listened in on a new client onboarding call.  
 
I don't typically attend these calls. I'm the marketing person behind the scenes at Blue Fox (you know, the one showing up in your inbox with beautifully written newsletters).  
 
But our CEO suggested that I listen to this one. She said I might be surprised by the conversation and to keep in mind that many of our clients come to us in the same state of mind.  
 
Financial shop talk is what I thought I would hear.
 
Boy, was I wrong!
 
This is what surprised me: 
 
"What are you looking to gain from our partnership?" we asked.
 
"I'm looking to gain stability," said our new client. "I've been working really hard to teach myself the finance side but realized I need to close the gap with your expertise.  We could never trust our numbers. Numbers are facts, and we should be able to trust them to make decisions!"
 
These are some of the words our client shared with us. But it was the unspoken emotion behind their words that struck me.
 
They were frustrated, unsettled, timidly raising their hands. They knew it was time to ask for help. And now that help was there; all the emotions were coming to the surface.  
 
It was almost like they had financial management PTSD. 
 
What in the world happened to cause this level of stress?

​​It wasn't any ONE thing that was catastrophic. The simple answer is that our client is recovering from a not-so-good bookkeeper who made lots of mistakes and has since left the organization.  And now, those mistakes are rearing their ugly head, causing a whole shitstorm of re-work, cash flow challenges, and tax compliance issues.  
 
(That's why we always say you want a bad-ass bookkeeper, not a bad one!)
 
As the call went on, I could sense our client feeling more and more relieved in the spirit of our partnership.  
 
Can you blame them?! They just gained a financial thought partner and another set of hands to oversee accounting data entry, management, and reporting.
 
Isn't it clear? What Blue Fox really delivers is peace of mind! 
(And more time, consistency, financial access, process improvement, etc., etc., etc.)
 
And then the shop talk started, just as I suspected. The conversation was now all financials, processes, transfer of responsibility, data architecture, and high-level recommendations.
 
Here's a snapshot of EVERYTHING discussed (and then prioritized):

• Getting QuickBooks up to date
• Planning for equipment replacement
• Financial modeling
• Data analysis to streamline operations
• Expense allocation
• Data architecture
• Aligning systems
• Payroll accounting
• Tax and compliance notices
• A/R balances
• Point of sale systems
• Setting up a more natural Chart of Accounts
• QuickBooks tags
• QuickBooks projects
• Internal controls for receipts
• How to become a certified WOM (Women-Owned Business)
• Calculating overhead percentages for grants
• Allocating admin costs

 
My marketing mind was swimming at this point :) That's when I stopped paying attention (a symptom of being a creative person) and just started writing.
 
Nonprofit leaders need to know that they are not alone in feeling overwhelmed by financial management.
It's common for organizational leaders to have a background in service delivery/programs, marketing, or fundraising, not financial management and strategy. AND THAT'S OKAY! 
​ 
That's why companies Blue Fox exist!  
 
We set our clients up with the most efficient and tech-savvy financial processes to save them time and frustration. Then we provide access, information, and analysis to give clients the power to make strategic, data-driven decisions.
 
The onboarding call was almost over, so I zoned back in and heard our client say, “You have no idea the amount of confidence you're giving me! "It makes me sad for the stress we've experienced, but we're so happy we found Blue Fox to help us!"
  
Confidence.
Peace of Mind.
Kindness.
Understanding.
Patience.
 
We’re not your average accounting firm, are we?
Far from it!
 
Our CEO always says, “We’re just humans serving humans.” 
 
An outsider might think that we’re just a bunch of bean counters performing accounting, payroll, and tax work for our clients.  But we know it’s more than that. 
 
When a nonprofit organization improves its financial stability, its leadership can take better care of staff members and deepen its ability to provide mission-driven services.  Humans serving humans.
 
And that, my friends, is the ripple effect of care, kindness, and humanity.

Written By: Chelsea Clementi, Director of Marketing & Business Development, Blue Fox

I'm risking here.

I want to share a story with you, and I hope it will help you or someone you love one day.

Almost a year ago, I was diagnosed with an incurable, chronic inflammatory condition called endometriosis.

If you've never heard of endometriosis (or endo for short), I'm not surprised.
Most people haven't.
I really didn't understand what it was until I was diagnosed with it and forced to consult the interwebs. Those who suffer from endo experience a broad range of symptoms. That's part of what makes diagnosis tough.

Yet, "tough" is no excuse for how this disease rages on with little medical research or attention.

Endometriosis affects at least 1 in 10 women. (At least = probably more because it's not diagnosed correctly.) To put that in perspective:

• 1 in 16 women suffer from heart disease
• 1 in 8 women suffer from breast cancer

There are few known therapies for treating endo. Its effects can be (and often are) debilitating.

Even more disturbing: On average a woman must see 8-10 DIFFERENT doctors/medical professionals before she is properly diagnosed with endo.

For me, that meant misdiagnoses started as a teenager and continued for two decades.
For me, that meant hearing (over and over and over) from doctors that my issues were simply "abnormal."
Or even worse, that my condition was just my own "bad luck."

But the truth is: I'm one of the lucky ones.
Many women die from endo complications.
Many women struggle with infertility due to endo.
Many women suffer with more pain than I ever had.
And many - SO many, TOO many - women don't have access to quality, unbiased healthcare.

The result: needless suffering.

In December 2021, I went for surgery so that my doctor could remove a life-threatening endometrial cyst from one of my ovaries in addition to performing other endo treatment. By all accounts, the surgery was successful, and I'm feeling better than I have in 10 years. The journey ahead is uncertain, but I'm optimistic about my physical health for the first time in a very long time.

​Getting a letter from the IRS is terrifying. Most of us respond with: WHOA. #whatthefox?!
 
As you rip into the IRS envelope, all you can think about is how much you're going to owe. What went wrong with your tax return? And what do you do now? 
 
If you use a big box tax service (you know, like the kind with a dude on the corner waving a sign to get you to walk in), there may not be anyone to help you now that you're in hot water. That is unless you paid for extra coverage to protect yourself. And why should you even have to pay for protection? We think companies should stand behind the work done by their employees. If they made a mistake, they should fix it – for free! (And btw: sometimes they charge for a protection fee and still won't make it right. That's the WORST.)

​The truth is, when you walk through the doors of a high-volume tax prep business, there is no way to know the level of expertise of the person you're hiring. Yes, some of the tax preparers at these offices are retired CPAs or EAs (Enrolled Agents). But it's more likely you will get the tax newbie specifically trained to find data on your forms and enter that data in their system. Where's the strategy and personalization in that? 

It's because we talk to people who have been burned ALL THE TIME. This year especially, we're seeing a massive influx of new clients coming to us with significant tax issues. The mistakes we're seeing could have been avoided with the help of a professional tax preparer (like us).
 
Our team is appalled by the tax problems that new clients bring to us. So, we're putting on our hard hat and going to work for them to:

• Amend and correct previous year tax return filings (sometimes for bigger refunds)
• Assist with IRS nastygrams and correspondence to find a resolution
• Provide an understanding of payment options when large balances are due
• Help folks understand their tax situation in a big picture way
• Devise a plan to maximize tax savings and minimize an "OUCH" on future tax returns

 
We can't stress this enough: hiring a professional, experienced tax preparer is the best way to avoid that dreaded letter from the IRS.
 
This is especially true if you have a complicated tax situation: own your own business, have investment income or rental income, make more than $200K, got married, had a child, etc. If you're not sure whether your tax situation is complex or not, we wrote a list of factors to consider on this blog:
 
[How to Determine if You Have a Complicated Tax Situation.]
 
If you think there must be a better way, there is! 
 
Meet the Blue Fox tax team at your service. We believe that people matter and highly-trained strategic thinkers should not be taken out of the tax preparation equation (pun intended). We spend a lot of time keeping up with changes in the tax code and making sure our clients leverage every opportunity for tax savings possible. Would you like us to do that for you?
 
If you'd like to chat with us, schedule your FREE Consultation by completing the form below that best describes your tax situation:
 
Individuals, 1040 + W-2
Self-Employed 1040 with Schedule C, A or E
Nonprofit Organizations, 990
Social Enterprise and For Profits, 1120, 1120S
 
We look forward to helping you!