non-profit organizations

The interest expense on the income statement for the year is $1,560. This one is kind of tricky – you have to pay interest on loans there is really no way around it. You could either pay off the loan with the money that is in savings – this would save you a ton on interest – or you could try to find another bank with a lower interest rate for this. Because this is a non-profit organization paying interest on a loan is really unrealistic – If I were in control of the budget this would be paid off with the money that is in the checking account.

Red Flag 4 The balance sheet shows that the checking account has over $20,000 in it, and the account does not pay interest. The gift shop does not have an interest bearing account. This is a problem because the gift shop is a non for profit organization so it really needs to be a little smarter with its finances – this checking account should really be an interest baring account. This needs to be switched over – it might not make a fortune but it would definitely be better served if we were gaining interest on this money that is just sitting here.

Red Flag 5 You notice that in the floral cooler there are many flower arrangements which are looking as if they are dying. Not only is this not appealing to the customers that do come into the gift shop but this also means that whomever is doing the ordering for the gift shop is ordering more than they are selling – someone needs to go throw and make sure that there is not a lot of back stock for the gift shop – ordering more than the gift shop is selling is an internal control that can be fixed. Red Flag 6

There are five employees who are paid; one fulltime and the rest are part-time. The fulltime employee purchases the stock, which is to be resold. She places purchase orders, receives the goods, and pays vendors. Her sister is also a part-time employee. I really do not see the need to have that many employees running a gift shop that is not making any profit. If cutting back some hours would help until we can get the gift shop back to a profit or even just where we are coming out even then I think that should be done.

We also need to make sure that there is just one person handling the books if we have to many employee’s doing the ordering and such than mistakes may happen. Our fulltime employee needs to take on more responsibility in the gift shop so the part time employee’s can be cut back. Since there is going to be a cut in what is being ordered for the shop this should increase her time to be helpful to customers and clean the gift shop.