The summer months often bring a lull in the activity of an investment club. This makes it a good time to inspect your procedures for preventing accounting disasters. You can think of these as your accounting preventative maintenance. Many large problems can be prevented with regular checkups of your books.
First, when was your last audit? Ideally, an audit should be done annually. Clubs sometimes overlook this when they have a trusted longtime treasurer. Unfortunately, even experienced treasurers can make mistakes. Don’t let small errors compound.
Are your books reconciled with your statements frequently? Are all members informed of these reconciliations? Frequent reconciliation helps spot errors that may cause problems in the future. Monthly reconciliation is best but quarterly will at least help prevent bigger problems.
Take the time to train an assistant or new treasurer. Let them use the accounting software under the guidance of an experienced treasurer. Or, if possible, arrange for the new treasurer/assistant to attend a training offered by a local BetterInvesting chapter or via a webinar. Have the newcomer observe or help with the audit if an audit is needed. Also, training in tax reporting would be helpful to a new treasurer. The summer is a good time to go over tax software and reporting requirements when there’s not a deadline to meet for filing a return.
On the subject of tax reporting, I noticed an increase in support requests from clubs being assessed fines by the IRS for late filing of the club tax return. In some instances the fines have been tens of thousands of dollars. Consider designing a checklist of items needed for tax filing. Make sure the treasurer isn’t the only one responsible for seeing these tasks are accomplished.
I would include some procedure for ensuring the return is complete, including signed. Also, ensure that the return was mailed by the deadline with proof of mailing.
To keep all these tasks straight, checklists can be helpful. Consider designing a preventive maintenance checklist for your accounting. Preventive maintenance can prevent the time and frustration of major problems in the future.
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