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Written By A. Michael Gellman (CPA, CGMA)

As nonprofit organizations continue to adjust to each new twist and turn this crisis throws at them, sometimes basic steps such as updating vacation accruals can catch you by surprise.

It is easy to get worn out by this crisis. Everyday seems like a battle with new hurdles constantly surfacing. This, coupled with remote working, is just plain disruptive, unsettling, and uncomfortable. I have seen organizations become so hyper-focused on the crisis that certain basic tedious tasks are not anticipated and end up being missed.

A perfect example of this is vacation accruals, which can become a significant material financial performance issue (especially if your operating procedures only include annual year-end adjustments instead of regular monthly close adjustments). I have received so many emails and phone calls about vacation accruals catching organizations by surprise. During this crisis staff are working harder than ever, with little or no opportunity or encouragement to take vacation. Makes sense with no place to go. Consequently, unused vacation hours have been growing since the crisis began. This directly leads to a growing financial obligation that might not have been recorded.

Why is missing a vacation accrual adjustment a big issue? Because confidence and trust are under great pressure now. With so many unanticipated actions happening all around us, the potential for the financial picture to change up and down as things unfold is huge and highly likely. Most of these variations can be blamed on the crisis. But if we have to report that we missed adjusting something as mundane as vacation accrual, we can lose confidence and trust that we have good accounting systems in place and are managing financial resources responsibly.

This is a good time, especially for organizations preparing for year-end financial reporting, to check that regularly recurring accruals that are not directly triggered by daily operations are being adjusted and posted. Examples include vacation accruals, fixed asset management (depreciation, write-offs, disposals), performance bonuses, retirement matches, lease pass-throughs, income deferrals, inventory adjustments and write-downs, and many others. Reporting on these surprises is not fun and cannot be directly blamed on the crisis.

Planning Tip – No matter where you are in your fiscal year, take a pause from crisis management and check to see if monthly and anticipated annual accruals are being tracked and are on your radar screen. If you are behind on these steps, make a commitment to catch them up quickly, report the results, and adjust your forecasts. Information now is always better than information later or too late.

Crisis management is unrelenting and extremely tiring but is not an excuse for missing the basics. So, save yourself and your organization a distraction later by now catching up all your accrual adjustments. All will benefit.

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