On cash... I agree with Don's comments and concerns about cash accounting. I live and work in Mexico where it is not uncommon for people to insist on cash to the point of not accepting a debit card. For major expenses, I will use an ATM to get nearly the exact amount for those expenses and only the slight difference ends up in a petty cash drawer. We do have occasional minor expenses for printing, copies, signs, etc, where they either do not accept debit cards or it is just too small to make it worthwhile. Also reimbursing individuals for minor expenses is easier in cash. There is no checking system so I can't just write a check. It is either a bank transfer or pay them in cash. The good news is that bank transfers are very easy, accomplished on line and used for anything major.
Will On 2020 Jul 25, at 07-25 07:47:17, doncram <donc...@gmail.com> wrote: Thanks Will, Jean, and John for your jumping in, and your many good points in response to my posting. To Jean, yes, most important to me would be development of Job Costing, because then many/most nonprofits could be served (which must be able to track restricted grants) and both non-profits and for-profit businesses could internally budget and track actuals for their projects/jobs. Job Costing again is not needed for generating overall financial statements (Balance Sheet, Income Statement (called Revenue less Expenses for nonprofits), and Statement of Cash Flows), because only totals are reported in most financial statements going externally. Maybe for that reason, many persons are not aware of how crucial Job Costing is for many organizations. You cannot expect the organizations to have one system just for external reporting, and separate systems to track revenues and expenses in different narrow areas for internal purposes and for specialized purposes like reporting back to grant givers. And it is crucial for use in teaching, in my opinion; it is definitely always included in the second of two intro accounting courses that are required of all business majors in any U.S. university or college. And second, lack of proper Statement of Cash Flow reporting is another drawback of GnuCash, a serious one for teaching purposes and also important in how practice should work. And fixing these two gaps would address the biggest concerns I have, enough for me to become comfortable to recommend GnuCash use in classes teaching accounting, say (which is a very important threshold: is GnuCash good enough to be incorporated into teaching/learning of accounting). I do have two other major concern areas about GnuCash, which I think can be mostly addressed by new documentation. Or by an informed teacher giving a course, or by an informed consultant/coach to a small business or nonprofit entrepreneur. Note I do not think "everything possible" must be done. For two examples, I think GnuCash's lack of coverage of inventory is NOT a serious problem, because inventory can be handled by a spreadsheet or database, as is done in many businesses that have significant inventories, instead of their using the available Quickbooks inventory stuff. Quickbooks' treatment is not as good, in some serious ways, as what the business does in their separate spreadsheet/database. Only summary journal entries, based upon the spreadsheet detail, are needed in GnuCash. The second example is that I am not concerned about GnuCash's lack of a fixed assets module, i.e. for recognizing property plant & equipment purchases, and depreciation thereof. These are my views about major areas needed or not needed for GnuCash to be recommended/used in accounting courses. I like John's comments about cash management concerns. To Will, when you receive a cash donation, I would think that should be taken directly to the bank and deposited, so having a clear and auditable record is ensured, rather than allowing it to go into a petty cash pot which is also used to pay for expenses. At a fundraiser where lots of cash is received, there can be a simple counting sheet provided which one or two others could use to verify starting cash and ending cash. And then the ending cash is to be deposited to the bank (and those witnesses to the counting could possibly check to see that exactly that amount was deposited). That way all cash receipts are auditable (e.g. potential donors can be sampled to ask what amounts they donated), and there is little/less chance of any accident in tracking, and there is more reason for others to trust the treasurer/accountant. If only a debit card is used to pay for expenditures, then there is clear record of everything outgoing, which is auditable, too (show us the receipts). I dunno, if in your area you have to use cash to make market purchases (do you really, would a debit charge really not be accepted?), then at least the petty cash pot could be one-way: supplied only by specific withdrawals from the bank, with payments out documented by receipts. And that petty cash could be inspected at any time, and selected receipts can be further checked to verify that purchases claimed are matched by items now on hand, say. If you mingle incoming and outgoing cash, it would be harder if not impossible for auditing/inspection to be done, and easier for mistakes to be made, and I think board members or others should question why the system not set up differently. (This is partly about what Chart of Accounts makes sense, but is not about GnuCash features in any way though.) Will's use of term "falsification" about any practice of using different dates for recording transactions around the end of the year is kind of alarming. I was trying to be descriptive of what I think actually happens in an organization which has chosen to stay on a cash rather than accrual basis. "Earnings management" of various kinds is common, in fact, as proven by academic studies, and just as much in firms using accrual basis. It is bad when there is any deception and any selfish interests potentially being served (e.g. just enough change being made to allow a manager to earn a contract bonus, for example). For BBG there is no selfish interest possible, and I just saw it as a bookkeeper "tidying up" so that late bills from December events would be recorded "where they should be", so the next year's accounts should be cleanly started. Just like if they were able to collect invoices and promptly pay the outstanding bills, really on December 31. For a for-profit, where the timing of cash receipts and payments would affect tax reporting, yes, that would not be allowable. I think, but now am less sure, that nothing is wrong with a nonprofit doing that. Although I myself would in fact use accrual accounting and set up APs and ARs. And about Paypal, yeah it would be better, and is what I would do, to explicitly show a Paypal account and its balance. (This also is not about GnuCash features in any way.) Jean, yes the possible coverage of Job Costing has been discussed within GnuCash development (including in big discussion located within a long-standing bug report somewhere), but I don't think it has been properly discussed out. What current or prospective teachers think, teachers who could adopt use of GnuCash into courses and could greatly expand its usage by different types of users over time, should matter a lot, IMO. I do assume/believe that GnuCash programmers and other volunteers do want to have a greater impact if possible, but I assume they naturally focus mostly on serving the current users (which do not include anyone needing job costing, besides some who need it but don't know they do). I dunno, would it help if I wrote out my views about relative importance of various changes, in one essay? Don On Sat, Jul 25, 2020 at 3:31 AM John G Sullivan <sullij_27...@att.net> wrote: > When I saw this come up, I avoided jumping in since I'm not an accountant; > however, I have been treasurer for a couple of nonprofits, including one > which are subsidiary of a large nonprofit. > > a. the expectations of any software to fit most issues is high. The > treasurer is almost always going to find specific needs which examples > don't cover. I still don't understand how GnuCash developers manage to do > as much with open source software. > > b. I've used QuickBooks, both stand alone and online and found it > expensive, put too much 'under the covers' and designed for users for don't > want to have to understand accounting. I also know treasurer's who use > Quicken to do the job. If you spend the time you can have a very > professional setup. > > c. 20 years ago I had access to the very top end professional accounting > software. I found the ability to follow standard accounting rules, > flexibility to provide reports excellent; however, cost is outside the > 'ballpark' for most nonprofits. > > Consider the number of transactions, the total overall necessary balance > sheet and income/expense accounts. If you don't have too much activity, you > can do this with anything, including paper and pencil. The real turning > point is when (in the US) you pass the 990 reporting thresholds and much > document to your board and outsiders particular information. > > A few side notes: > > I consider cash on of the most vulnerable areas of a nonprofit. I took > over one company where $1,000 was floating around in a wooden box and > everyone had access to the box. I require collected cash be deposited > immediately. Debit cards and reimbursed expenses are used for expense > spending. > > I treat PayPal as a bank account. ( I don't have the account set where any > purchase is immediately charged against my bank. However, I also have > receipts which go to PayPal) > > John G Sullivan > > > > > > On 7/25/20, 2:00 AM, "gnucash-user on behalf of jean laroche" > <gnucash-user-bounces+sullij_27615=att....@gnucash.org on behalf of > rip...@gmail.com> wrote: > > Thanks for the very detailed analysis of Gnucash's shortcomings for > nonprofits (and other businesses). > I'm not an accountant either, barely a computer scientist. > If I were to summarize the areas where GC falls short, it seems to me > GC > is missing: > - Support for Job Costing > - Cash Flow reporting isn't what it should be. > > Could the original poster (Don) confirm that these two features, if > fixed/implemented would go a long way toward making GC more suited for > nonprofits? > > Perhaps the developers (including me, in a modest manner) could then > discuss whether these would be easy to add/fix. Perhaps these features > have been discussed in the past? Job costing, in particular, may not > be > that hard to implement? The Cash Flow reporting might also not be too > hard to fix, once the OP specifies exactly how it should be done, > ideally. > > Jean > > > On 7/24/2020 10:03 PM, w...@theprescotts.com wrote: >> I have a few comments on this long post. I will preface it by > admitting that I am neither a tax attorney nor an accountant. I have kept > my personal accounts in GnuCash for many years. I am the treasurer for two > non-profits, or more accurately, two subsidiaries of one non-profit. But > neither of them are legal entities nor in the US. Legally, they are > probably more akin to informal associations. >> >> The suggestions for falsifying the dates of transactions for > convenience in accounting strike me as very bad advice. Is it even legal > for an organization that has to abide by US tax laws. >> >> Similarly, I don't understand the advice to just treat Paypal > transactions as if they were directly on checking. This would make > accounting for Paypal fees strange. For organizations outside the US, > Paypal no longer holds funds; they transfer them immediately, so the Paypal > balance is always zero except for immediately after a deposit to Paypal. > Even so, it is much easier to track activity treating Paypal as a bank > account. >> >> Finally, I don't understand the suggestions about not having a cash > account and immediately depositing all cash to checking. Perhaps it is > partly because I live in a country where many transactions are still done > with cash, where no one uses checks, just bank transfers. But I often > accept donations in cash, and often pay bills in cash. Not accounting for > those transactions directly would be neither accurate nor convenient. >> >> Will >> >> On 2020 Jul 24, at 07-24 22:13:26, doncram <donc...@gmail.com> > wrote: >> >> Here is an example set of accounts set up as best possible for a real >> nonprofit, "Botany Bay Gardens". This might be enough guidance for > a few >> nonprofits. But I explain why/how GnuCash usually fails for > nonprofits, >> how it usually cannot serve them well enough, so a Treasurer coming > here >> should probably decide to use Quickbooks (in its Pro version, or in a >> version packaged for Nonprofits) instead. Unfortunately the visiting >> Treasurer's time is usually wasted, even more so if they proceed with >> trying to implement GnuCash, because they can't tell in advance how > it will >> not work. I wish GnuCash would make a few changes, so nonprofits > could be >> served. >> >> Recently Fiona and Joshua (and last year BigAl) asked questions about >> how/whether GnuCash accounts could be set up to handle a nonprofit. > Here's >> how: see the attached Chart of Accounts, Balance Sheet, and Income >> Statement, for a real nonprofit, "Botany Bay Gardens" (not its real > name), >> and the following notes: >> >> 1. Setting this up in GnuCash just now did not take me terribly > long, but I >> already knew well what are the accounts that are needed and how I > want them >> organized. This is in the United States. I previously reviewed some >> similar but bigger nonprofits reporting in their publicly available > U.S. >> Internal Revenue Service Form 990 financial statements filings. And > I >> worked with the board and determined how their previous reporting > system >> did not work for them, as well as how it would not work well for > their IRS >> 990 reporting which they are soon required to start, because the > nonprofit >> is growing over the reporting requirement threshold. Take some time > and >> design out your own chart of accounts in a spreadsheet, and revise as >> necessary with others' input. >> >> 2. You have to use account numbers (which are optional in GnuCash > and in >> Quickbooks, but if you use them, they set the order) to make your > reports >> presentable, with ordering that makes sense for your organization. >> Otherwise the default alphabetical order is maddening. >> >> 3. I prefer to set up one "Placeholder"-type account titled "Cash", > which >> in this case contains two items: the organization's checking > account and >> its investment account with a local foundation (which charges fees > but >> handles investment of spare funds and assists in fundraising in > various >> ways). These are both convertible easily to real cash. I don't use > a >> "Petty Cash" account, because any cash collected in this nonprofit, > say at >> a fundraising event, should be promptly deposited into the checking >> account. You don't want to record each tiny separate addition to > the petty >> cash you have in hand (and indicating each as Fundraiser ticket sales >> revenue or whatever); you just want to record one big deposit of > all of it >> into the checking account (with just one entry recording the ticket > sales >> in total). >> >> 4. Note the way "Cash" is defined is consistent with U.S. and all > other >> countries' accounting standards: it is what is really liquid. It > would be >> nice if GnuCash provided a Statement of Cash Flows, one of the 3 > basic >> accounting reports, but it does not. The SCF would provide a >> reconciliation of income (from the bottom line of Income Statement) > to the >> actual change of cash from beginning to end of period. Showing how > changes >> in Accounts Receivable and Accounts Payable and Inventory and other > current >> assets and liabilities have used up or generated cash, and so on. > SCF >> reporting is maybe not crucial for a nonprofit, but GnuCash's lack > is a >> factor in why Quickbooks is used instead for this nonprofit. >> >> (Long, side comment or rant, please feel free to skip: GnuCash does > have a >> feature labelled that way, but it is a report invented by computer >> programmers with no concept of what cash flow reporting actually > is. It >> has no resemblance to the very well-defined SCF as taught in > accounting >> classes for all business students and as used in real life for > businesses >> and nonprofits. No offense at all is intended; I have the greatest > respect >> for the GnuCash programmers, current and past, who have achieved so > much. >> And I even admire how GnuCash's alternative is kind of clever, > although in >> an odd way not actually useful to anyone. Note the omission renders >> GnuCash less feasible for using in an intro accounting course, for >> example. (You can, with unnecessary work in a spreadsheet, compose > a SCF >> for your organization though. There is a structured exercise often >> provided in intro accounting textbooks, where students do that, > working >> from the Income Statement for the period plus beginning and end > Balance >> Sheets, plus additional information. It is just a mathematical, > easily >> programmable thing, but it is very hard to get right when doing on > your >> own. Accounting rules in all countries, at least for publicly traded >> companies, have required their financial statements to include the > SCF, >> during at least the last several decades. In the U.S. since 1989 or > so. >> End rant.) >> >> 5. The nonprofit actually does accounting mostly on a cash basis: > pledges >> of future donations are not recognized and recorded as Accounts > Receivable, >> bills due but not yet paid are not recorded as Accounts Payable. It > is >> simpler just to recognize those when you receive or send out > payment. And, >> at the end of the year, some expenses actually paid on January 2nd, > say, >> but relating to a December 28th event, are recorded as having been > paid on >> December 31. This is simpler than recognizing the expense on > December 28 >> and setting up an Accounts Payable, and has the same effect in > achieving >> matching of revenues and expenses in the past year period. (So the > Chart >> of Accounts should probably not have AR and AP, but I left them in, > in this >> example.) >> >> 5. There is no Credit Card account as I don't see why a nonprofit > would >> have a credit card. It should have a debit card or two usable by the >> Treasurer and the President, say. For a purchase, say, you just > make one >> entry, of the reduction of checking account balance by the debit, > and which >> expense category applies. >> >> 6. There is no Paypal account in this nonprofit's reporting, > although this >> nonprofit does sell tickets and receive dues there, so in fact > sometimes >> there are significant balances there. But before closing any > period, the >> accountant can just transfer the balance at Paypal to the checking >> account. Perhaps dating the transfer on December 31, say, even > though it >> actually is implemented on January 15. Each Paypal transaction can > be >> recorded just once, on date Paypal received the funds, as an > increase in >> checking balance and recognition of ticket sales revenue. Or maybe > it >> would be better to show a Paypal account, as part of Cash. >> >> 7. This nonprofit is simple in having no direct employees, so no > payroll >> expenses and no accounts to handle Social Security contributions or > to >> handle required Workmen's Compensation expense, etc. Instead the one >> hourly paid gardener person (say they get $15 per hour) is actually > set up >> by a local temp agency as an employee of theirs. The temp agency > issues >> paychecks and pays the necessary taxes, etc., for charge of > something like >> $18 per hour. The gardener's expense, for the nonprofit, is in > "Operations >> Contract Services". The nonprofit also has website and social media > work >> done by an independent contractor. At the end of the year, the > nonprofit >> does issue 1099 statements for this contractor and for any companies > whose >> payments during the year were >> >> 8. Where GnuCash really fails for this nonprofit, though, is that it > does >> not support Job Costing. Job Costing is not apparent in an > organization's >> overall, total reporting. It provides for internally useful > reporting. >> This nonprofit has multiple separate gardens which constitute > different >> programs, some of them individually funded by a separate grant, for > which >> tracking of expenses is required. It has several fundraiser events > each >> year, and the organization needs reporting that shows how it does in > each >> one. Job Costing, as can be done in Quickbooks, provides that. For > a >> construction firm, say, it would allow tracking of each separate job > (e.g. >> each renovation or new house construction) so the revenues and the > expenses >> for each one is reported. An Income Statement by Job is a standard > report, >> providing a column for each separately defined job and in total for > the >> organization. And management can try to figure out which types of > jobs are >> more profitable, and why. For a nonprofit, the Job Costing feature > allows >> you to show a restricted grant that is received as revenue in a > given job, >> and for you to document the usage of those monies by expenses > charged to >> that job. This is essential. By the way, you can also budget by > job, and >> have reports on Budget vs. Actuals by Job. >> >> (Another rant, sorry: When new users come to GnuCash and ask about > job >> costing, unfortunately they get a lot of misdirection, or at least > that is >> what I have seen a few times a few years ago. They may be directed > to >> expand their Chart of Accounts to add a new separate revenue line > for each >> job, and a new line for each type of expense incurred in each job. >> Consider a catering firm with 100 or 200 similar jobs each year. > The Chart >> of Accounts would rapidly become unworkable, and even though the >> information is separately recorded, standard reports don't work, > either. >> If Job Costing is supported, the Income Statement by Job report, run > for a >> specified period, would nicely show columns for just the jobs that > were >> active in that period, lined up nicely side-by-side. Some advice I > have >> seen given out seems crazy. And I think it would be fairly easy, >> programming-wise, for GnuCash to allow definition of job codes. In > each >> entry in a register or journal entry, the user would be allowed to > select >> which job is relevant, if any, in an available job code field. End > this >> rant.) >> >> I'll stop here. The last numbered note above is why GnuCash can't > be used >> for the Botany Bay Gardens nonprofit, while an oldish copy of > Quickbooks, >> the Quickbooks Pro 2017 version, does suffice. Like many, I > personally >> dislike most commercial accounting software (for how they drop > features I >> need, how they add junk i do not want, and how they try to charge > more and >> more, among other reasons) and I do like freeware in general and > GnuCash in >> particular, as far as it goes. But I cannot be at all professional > and >> impose usage of software that does not provide the internal > reporting that >> this nonprofit organization needs, when Quickbooks can do it (at > least in >> the Pro version, at one-time expense of $300 or so, although the > software >> tries to make you upgrade after 3 years by cutting off some > functionality). >> >> I hope this helps someone. Please do comment! >> --Don >> >> P.S. While writing this, I realize the Chart of Accounts that I > share omits >> a few things that the real nonprofit has, and that I discuss above: > for >> example it does actually need and use a grant revenue account line to >> record the grants received into its various jobs. Feedback about > these >> PDFs as teaching examples would also be appreciated. >> > <BBG_ChartOfAccounts.pdf><BBG_BalanceSheet><BBG_IncomeStatement>_______________________________________________ >> gnucash-user mailing list >> gnucash-user@gnucash.org >> To update your subscription preferences or to unsubscribe: >> https://lists.gnucash.org/mailman/listinfo/gnucash-user >> If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. >> ----- >> Please remember to CC this list on all your replies. >> You can do this by using Reply-To-List or Reply-All. >> >> _______________________________________________ >> gnucash-user mailing list >> gnucash-user@gnucash.org >> To update your subscription preferences or to unsubscribe: >> https://lists.gnucash.org/mailman/listinfo/gnucash-user >> If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. >> ----- >> Please remember to CC this list on all your replies. >> You can do this by using Reply-To-List or Reply-All. > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > > > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. 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