>This is not so much a comment on Quickbooks as >it is on accounting in general. I was involved >in a non-profit railroad museum that floundered >among other things due to poor accounting.

I have seen first hand, had the personal accounts of and read about the floundering and failure of many organizations, non-profit rail related and otherwise. Bad accounting is not a problem, it is the symptom of a problem. Lets start with the basics. Accounting is the responsibility of the management and the board of directors. Too many organizations of all kinds see keeping the books correctly as a costly exercise in tedium, instead of what it should be- your primary business compass and and a strategic resource.
If nobody in your organization said “hey wait a minute”, we have a butcher, a baker and a candlestickmaker in our ranks, hell lets do the books ourselves-the issue was bad management, not bad accounting.
Not everybody has the interest, aptitude, patience or training to deal with that part of the business. As with any deficiency, you must first admit you have a problem before you can address it. Be realistic. If nobody on your board knows a debit from a credit, the phone book is full of CPAÂ’s. Get help, donÂ’t run the organization into the ground.

>Not because the accounting was bad, but because >it was impossible to understand.

I have a pile of college credentials and passed all parts of the CPA exam after being out of school over five years. I am far from the smartest guy in the world, so it is not impossible to understand. It does require, like any profession, time, effort, interest and patience. If you expect to become a financial expert by buying “accounting for dummies”, and spending a good hour reading it, you are mistaken.

>To keep this comment short let me just say that >accounding is an art not a science, and the >rules for non-profit accounting make it even >more arcane.

Which is exactly why you get professional help just as you would with legal or medical problems. For some smaller, simpler organizations, cash-basis accounting is just fine, even though thats not generally accepted accounting principles. It depends on the organization, its size, complexity and hundred other things.

Fifteen years ago, non-profit rules were arcane. This was largely rectified when the Financial Accounting Standards Board issued “FASB’s” 116, 117 and 124. The web is a huge help, there are tons of resources out there. Even the IRS has a relatively plain english publication to help with tax and qualification issues.

>If the reports don't make intuitive sense insist >on getting a report that does.

I have no argument with that except at a certain point, especially with internal reports where thereÂ’s no required form or content. However the individual needs to know what they are reading.
In general, reports need to have detail to make necessary distinctions. You don’t just prepare an icome statement that says “Revenues $10.00, Expenses $9.00, Profit $1.00” for a reason.
The more complicated the business and the more involved the user is in running the business, the more the need for detail. One of my first jobs was reconciling a relative few of the THOUSANDS of CASH accounts a certain insurance company had.

>Logic and intuition are far more important that >arcane accounting bullshit.

Beyond the fact that “bu******” is flaming and the common expletive of dismissal for those times when somebody finds out something is more complicated then they think it should be (like life), the reality is that “intuition” ran quite a few businesses into the ground. There is a lot of logic involved in GAAP, even if there are a few compromises that are made to competing priorities and needs.

>And never loose sight of the cliche that "cash >is king"...and both insist on and pay more >attention to the cash flow reports than to the >balance sheets and income statements.

Think so, huh? Try this. In the Northeast USA, Conrail was born because of two things, idiotic governmental policy and the idea that “cash is king”. They made money because they never replaced anything, never upgraded anything until the concept of “standing derailment” became a reality. “Earnings” were in fact the slow and steady erosion of the capital base, in reality liquidating dividends.

In more recent times, a good deal of companies were being evaluated on the basis of “EBITDA”, until a few people found out the hard way interest, taxes, depreciation and amortization DO MATTER.

Generally, for most readers here, there arenÂ’t many depreciable assets, no accounts receivable, no intangible property, little capital gains or losses, so a good deal of incoming money is current revenue and a good deal outgoing money is current expenses, so cash is important, but its NOT THE ONLY THING.

>In the end only two things matter...an accurate >projection of cash in and cash ut, and the cash >balance in the bank.

This is so erroneous that a complete refutation is probably fruitless, let alone outside the scope of this response. There is nothing as tightly locked as a closed mind.

However, thereÂ’s a ton of companies that went to Chapter 7 with cash in the bank, an accurate and positive cashflow and unable to pay bondholders because they didnÂ’t pay attention to the debt piling up on the balance sheet.

In general, Mr. West's advice is similar to “buy term and invest the difference”, “never get burned buying bank cd’s” “eat all the protein and fat you want but skip the carbs”. Those nostrums may work for some, especially for a short time but really show a lack of understanding on the part of the individual giving the advice.


superheater@rrmail.com

As this thread has strayed far from railway preservation, and become a little too heated to boot, I'd prefer that we let it end here.

Nat. Mus. of Industrial History
eledbetter@rypn.org

> As this thread has strayed far from railway
> preservation, and become a little too heated
> to boot, I'd prefer that we let it end here.

Erik, it might be to heated, but how is this too far afield? Every single organization out there is facing increasing financial pressures and needs to think about how the records are kept, what records need to be kept, how to interpret them, etc. I know finance is never going to be as exciting as valve gear kinematics so...

I have a request. Since I've gotten considerable feedback offline in the past, some good, some bad, on the balance positive let the readership decide if the following issues are important or unimportant to the preservation organization.

Management, Organization, Marketing, etc.
Accounting and Finance
Taxes, Compliance, 501c3, etc.

If they readers think that these topics are of no value, then we all know such posts don't exchange any useful information and can avoid such topics altogether in the future.


superheater@rrmail.com

Finding a treasurer, following all the accounting and IRS requirements is one of the harder items for a railroad museum. However, it is something that cannot be ignored.



tcox@parknet.pmh.org

> Those nostrums may work for some,
> especially for a short time but really show
> a lack of understanding on the part of the
> individual giving the advice.

Superheater, with all due respect I know John West a bit better than you obviously do. The idea that John doesn't understand accounting won't bear close examination - he is quite capable of understanding financial documents.

I won't recite his railroading and business resume here, but it is extensive and impressive, and I'm willing to bet he knows the ins and outs of ConRail quite well. Unless you worked for the USRA or FRA or ICC in the 70s and 80s, I would advise you to not make any more rash statements until you learn a little more about him.

He stated an opinion. You disagreed. Game over.

JAC

> . The idea that John doesn't understand
> accounting won't bear close examination - he
> is quite capable of understanding financial
> documents.

> John you didn't give a email so I can't respond offline. I'm sorry but I didn't say he didn't understand.

HIS WORDS:
Not because the accounting was bad, but because >it was impossible to understand.

I don't mind being taken issue with, I think debate, even vigorous debate is healthy and I admire the urge to come to a friend's aid. All I insist on is having my remarks represented accurately.

If you provide a email in the future, I'll not bother the rest of the folks.



Superheater@rrmail.com

My apologies if I inadvertently offended somebody. My comments were pointed at poor or missued "accounting", and not at "accountants" (who usually do good accounting). Some of my best friends are accountants. Usually I only have to say that about lawyers.

I am posting this only because the issue IS important to preservation, because poor or misunderstood accounting can and has adversely impacted preservation efforts.

But given the current heat, perhaps it is a subject that can (and should) get launched again after a short pause and in a more positive atmosphere.


jbwest@att.net

> Erik, it might be to heated, but how is this
> too far afield?

No, these topics are not too far afield, I'll withdraw that assertion. However, this thread is definately too heated to constitute a productive exchange on management, 501c3 status or accounting. It does not conform to the spirit in which we request that people conduct themselves on this board.

So I'll change my request--either we continue this discussion with greater courtesy and mutual goodwill, or I'd prefer that it end here.

eledbetter@rypn.org

> My apologies if I inadvertently offended
> somebody.

John, maybe I decided to go for the nuke button too fast as well. I'll email a few thoughts offline to explain my raw nerves.

As for the lawyers, well we have few that post here that aren't part of the tort bar, so they aren't all bad.

Superheater@rrmail.com

As CFO of our institution, the battle for me is reversing years of deficit spending and explaining that restricted money is just that. It's hard to say, "hold your expenses down," when the organization has money in the bank. The phrase "let's borrow it from XX restricted fund has been bandied about not often, but too often for me. Does anyone else out there borrow from their restricted funds? If so, do you have a formal borrowing review or do you just "hope to make up the difference next year."

wyld@sbcglobal.net

One area that I have seen many non-profit organizations (as well as regular businesses) get into trouble in is with the payroll. There are simply too many regulations and too many changes for many organizations to keep up with.

I am involved with a company that has helped THOUSANDS of non-profits get into (and stay into) compliance with payroll regulations. It is a payroll service called Paychex, Inc. and probably has an office near you. For the minimal fees that are charged, it is kind of silly to NOT consider it, especially since we specialize in non-profits and small payrolls.

Sorry if this sounds too much like a commercial, but I have seen too many organiazations pay unnecessary penalties to the IRS etc.

Check it out at:

http://www.paychex.com

hillmans@cinternet.net

I have a similar challenge with the small for-profit for which I am CFO (we support a black-hole called a PV.

The correct solution is to recruit board members and other active participants who have had some experience managing finances..."businessmen". In many cases boards tend to be dominated by the talented and hardworking hands-on doers who actually restore and maintain the equipment. Sometimes it is a hard sell to get folks to understand that those skills are different from what it takes to be an effective financial manager....it's like trying to convince my intelligent medically trained wife to pay off her credit card debt.

And you're dealing with volunteers not wage slaves, and folks who are emotionally involved with the artifacts and want them well cared for, damn the cost.

In the end the organization is only going to be as wise as it's leadership.

Okay, how do you deal with the imperfect reality. Hide the cash, make it as hard as possible to touch, be stubborn, and do your best to teach the great unwashed the facts of financial life....actually I have found they can learn. Clearly it will show up on balance sheets (damn those balance sheets), but I eliminate it from cash flow analyses and emphasize the losses on the P/L. I have insisted that any use of earmarked cash require full board approval, and the full board meets as infrequently as we can get away with.

Have I succeeded? Well, no....but at least I have reduced the outflow.



jbwest@att.net

>I have
> insisted that any use of earmarked cash
> require full board approval, and the full
> board meets as infrequently as we can get
> away with.

Doesn't this lead to a form of micromanagement, the board gets caught up in day-to-day rather than long term direction and vision. At our last board meeting 5-10 minutes was actually taken to discuss floor repairs in our snack bar!...a lousy 100 bucks!

wyld@sbcglobal.net

> Doesn't this lead to a form of
> micromanagement, the board gets caught up in
> day-to-day rather than long term direction
> and vision. At our last board meeting 5-10
> minutes was actually taken to discuss floor
> repairs in our snack bar!...a lousy 100
> bucks!

An earlier response was deleted because it was too long winded, and after reading it I wasn't even sure I even agreed with myself.

There are really two issues here. One is getting organized so the the right people focus on the right issues. And the second is keeping meetings on track. The first is probably too complex to deal with briefly, and there are a lot of better resources than me for dealing with the second. I will say I have a bias for a strong chairperson who enforces the agenda and knows when to tactfully but forcefully cut off extraneous discussion.

In every organization I have been a part of, getting meetings to focus on strategic issues is always a challenge. People feel pressed to solve todays problems, and it is often hard to focus on getting more wood when the kitchen is on fire. The traditional way of handling this challenge is to schedule specific meetings just for that, perhaps have them in a special venue to emphasize the difference, and put someone in charge who has an interest in the longer term issues.



jbwest@att.net

In the last several years the group has discussed boards, managers, members and their places in an organization. What I have distilled from all these messages is:
1. The organization must have a stated purpose, goal, mission statement and master plan to achieve same.
2. The board is the interface with the world working to achieve #1. The requirements of a board member should be that they are capable of working at a level outside the confines of the organization to achieve #1. To use the vernacular ...schmoozing at township, municipal, state or federal levels, corporate settings, public meetings and with other organzations heading in the same direction.
3. A director, manager or head person is the interface between the board and the rest of the group. The director presents the organizations needs to the board and the board decides which or what can be done balancing these against #1, monies available or attainable and how all this fits into the master plan. The board is navigating the ship so to speak to get into the chosen harbor.
4. The director is the nuts and bolts guy coordinating the facilities and the members to achieve #1. This is the person who decides what sails go up based on the current winds and facilities available. This is a terrible job because the director is the person that has to keep the organzation running, the members satisfied and the board happy. This job is the neck of the hourglass.

By the way ... controlling a meeting can be made much easier with an appointed facilitator. If you have never received training in this job, I recommend you do so. The personalities present at any meeting can quickly be sorted out and the methods for handling them put into place to keep the meeting focused.

Yet another ...these points are not unique to the Railroad Preservation game. If you can find a successful organization in any field, take a look at it and see what makes it tick.

lamontdc@adelphia.net