The complex world of winery operations demands precise financial tracking, yet many wineries struggle with their cost accounting practices. From small boutique operations to large-scale producers, these accounting missteps can significantly impact profitability and growth potential.  

“A common issue among winery owners is misunderstanding what costs should be going into making a case of wine, and what estimates are needed.  It is all too common where we see artificially high margins with growing inventory values on the balance sheet, which may indicate the business is heading towards a serious excess inventory position that will require heavy discounts to right-size the operations.  Having the right systems in place from a cost accounting perspective is vital to any company’s long-term success.”  – Jamie Emerson-Heery, Partner – Assurance and Advisory 

6 cost accounting mistakes wineries make (and practical solutions) 

This article explores the critical cost accounting mistakes wineries make and provides practical solutions for better financial management, focusing on inventory valuation, production costs and overhead allocation. 

Failing to separate vineyard and winery accounting

Many winery owners attempt to manage their entire operation under a single accounting system. This approach overlooks the fundamental difference between vineyard operations, which function as traditional agriculture, and winery production, which requires manufacturing-style accounting.    

• The vineyard side typically operates on a cash basis, tracking immediate expenses and income within a growing season. However, the winery requires accrual accounting to properly track long-term investments, aging inventory and delayed revenue recognition.  
• This dual-system requirement often creates confusion and leads to misrepresentation of actual costs and profits. 

Wineries must invest in robust accounting systems that can handle both cash and accrual methods.  Don’t rely just on spreadsheets, leverage technology as best as possible.   

Mishandling inventory valuation 

Wineries frequently underestimate the complexity of inventory valuation. The extended production cycle, from grape to bottle, creates multiple inventory stages that require different valuation methods.  

A significant challenge lies in tracking bulk wine inventory movements and proper valuation during the aging process, including the critical monitoring of volume loss during barrel aging and tank transfers. Additionally, bottled wine inventory adjustments, including samples, promotional items and wine club allocations, impact total inventory value but serve different business purposes. 

Many wineries fail to implement proper systems for tracking these various inventory stages, leading to inaccurate cost calculations and potentially flawed pricing decisions. The complexity increases when dealing with multiple vintages and varieties simultaneously aging in the cellar. 

Overlooking hidden production costs and misallocating overhead expenses  

The true cost of producing wine extends far beyond grape prices and barrel expenses.  

“It’s easy to forget about all the various components going into producing a case of wine.  Once you think you have it all under control, take a step back and think ‘what’s missing here?  Did I capture vineyard rent expense?  All labor costs from cellar and bottling?  Or did I have too much excess capacity this year?’  These questions will help ensure inventory is properly stated so you can manage the business as tight as possible.”  – Jamie Emerson-Heery 

Equipment depreciation and maintenance expenses should be allocated to specific wine programs rather than treated as general overhead. Furthermore, utilities, cleaning supplies, laboratory costs and quality control measures all contribute to the total production cost but frequently remain unaccounted for in specific wine programs. 

The distribution of overhead costs poses a significant challenge for wineries of all sizes. Many operations fail to properly allocate these expenses across different wine programs and sales channels, leading to incorrect pricing decisions and profitability assessments. 

Direct-to-consumer sales channels, particularly tasting rooms, often suffer from improper overhead allocation. Many wineries fail to account for the full cost of staffing, facilities and samples when evaluating tasting room profitability. The complexity increases when considering shared resources between different sales channels and production areas. 

Inadequate technology integration 

While many wineries invest in production software and point-of-sale systems, they often fail to integrate these tools with their accounting systems. This disconnection creates data silos and makes accurate cost tracking nearly impossible.  

Modern winery operations require seamless integration between production tracking, inventory management, sales systems and accounting software. Without this integration, staff must manually transfer data between systems, increasing the risk of errors and creating inefficiencies in the accounting process. 

Sales-related costs that impact pricing and business decisions  

Different sales channels demand different cost accounting approaches. Many wineries apply the same costing methodology across direct-to-consumer, wholesale and wine club channels, missing crucial variations in operational costs.  Several key cost factors vary significantly between channels: 

Channel-specific packaging and handling requirements 

• Marketing and promotional costs 
• Shipping and logistics expenses 
• Sales team compensation 

Understanding these differences becomes crucial for accurate profitability analysis and strategic decision-making. Wineries must develop systems that capture and allocate costs appropriately for each sales channel while maintaining consistency in overall financial reporting. 

Moving forward with better cost accounting 

Implementing proper cost accounting requires a systematic approach and ongoing commitment to accuracy. Regular staff training on cost tracking procedures ensures consistent application of accounting policies across all departments. Integrated technology solutions that connect all aspects of the operation provide real-time visibility into costs and profitability. 

Working with BPM  

Partnering with a firm that understands the wine industry’s unique characteristics can prove invaluable when it comes to navigating these challenging cost accounting waters.  

BPM brings extensive wine industry experience and helps wineries implement effective cost accounting systems that drive profitability. Our team works directly with winery owners and managers to develop customized solutions that address specific operational needs while ensuring compliance with accounting standards and regulatory requirements. 

By partnering with BPM, wineries gain access to industry-specific knowledge and proven methodologies that transform their cost accounting from a challenge into a strategic advantage. Their comprehensive approach helps wineries build sustainable financial management practices that support long-term growth and profitability. To find out more, contact us. 

A trust is a powerful legal arrangement that allows a third party (trustee) to hold and manage assets on behalf of beneficiaries.  

Whether you’re looking to minimize estate taxes, protect family wealth across generations, maintain privacy, or establish specific conditions for asset distribution, understanding what a trust is and how it functions is essential for preserving your legacy and ensuring your wishes are carried out precisely as intended. 

What is a trust, and how does it work?  

A trust is a legal arrangement where a person or entity (the trustee) holds and manages assets for the benefit of others (the beneficiaries).  

It creates a fiduciary relationship that allows for controlled asset transfer according to specific terms established by the trust creator (the grantor).  

Trusts can be tailored to meet various financial and family goals, from tax efficiency to asset protection. They provide a structured framework for wealth transfer that can operate during your lifetime and continue to fortify your legacy. 

Types of trusts  

Various trust structures serve different purposes in estate planning, each offering unique advantages depending on your specific goals and circumstances. In general, there are two umbrella distinctions:  

Revocable trusts 

Revocable trusts, also called living trusts, can be modified or terminated by the grantor during their lifetime. These trusts allow you to maintain control over your assets while establishing a framework for their management and distribution.  

The most common type is the revocable living trust, which holds your assets during life and distributes them according to your wishes after death.  

Consider a revocable trust when you want flexibility to adjust your estate plan as circumstances change, desire to avoid probate, or need a mechanism for managing assets should you become incapacitated. 

Irrevocable trusts 

Irrevocable trusts cannot be altered or terminated without beneficiary approval once established. When you place assets in an irrevocable trust, you legally remove them from your estate, relinquishing ownership and control.  

Common irrevocable trusts include life insurance trusts, charitable trusts, and special needs trusts. These structures are ideal when you want to minimize estate taxes, protect assets from creditors, provide for beneficiaries with special needs, or make significant charitable gifts while potentially receiving tax benefits. 

Why create a trust?  

A trust document can be a powerful tool for preserving wealth and ensuring your wishes (and wealth) are distributed in the way that truest to you and your goals. Let’s take a look at some of the key benefits of creating a trust.  

Secure efficient wealth transfer to future generations 

Trusts provide a structured way to transfer assets to children, grandchildren, and beyond while maintaining control over how and when those assets are distributed.  

You can establish specific conditions for inheritance, such as reaching certain ages or milestones, completing education, or demonstrating financial responsibility. This protection is particularly valuable when beneficiaries are minors, have special needs, or may require assistance managing their inheritance. 

Minimize the burden of estate taxes 

Trusts can play a crucial role in minimizing estate tax liability. By removing assets from your taxable estate through certain irrevocable trust structures, you may significantly reduce the tax burden that would otherwise fall on your heirs.  

This strategic approach allows more of your hard-earned wealth to benefit your loved ones rather than being diminished by taxation. 

Protect your assets 

A well-structured trust can shield your wealth from various threats, including creditors, lawsuits, and potential divorce settlements. Certain irrevocable trusts create a legal barrier between your personal assets and outside claims, providing peace of mind that your family’s financial security remains intact regardless of unforeseen circumstances. This protection becomes increasingly valuable as wealth grows and potential exposure to liability increases. 

Enhance your estate’s privacy 

Unlike wills that become public record through probate (more on that in a minute), trusts offer a level of privacy that many wealthy families value. The terms, assets, and beneficiaries of your trust remain confidential, shielding your family’s financial matters from public scrutiny.  

This privacy can be especially important for high-profile individuals or those concerned about potential conflicts arising from public knowledge of their estate plans. 

Avoid probate 

Assets held in trust bypass the often lengthy, costly, and public probate process. This means your beneficiaries receive their inheritances more quickly, with significantly reduced administrative costs and court fees.  

Probate avoidance is particularly beneficial for families with real estate in multiple states, as it eliminates the need for ancillary probate proceedings in each jurisdiction where property is owned. 

Plan for incapacitation 

Trusts provide seamless management of your affairs should you become unable to manage them yourself.  

Unlike powers of attorney, which may face challenges or delays, a properly funded trust allows your chosen successor trustee to step in immediately to handle your financial matters, pay bills, and manage investments without court intervention. This continuity helps to ensure your care needs are met and your financial affairs remain in order during vulnerable periods. 

Plan for beneficiaries with special needs 

For trust beneficiaries with disabilities, specialized trusts can provide financial support while preserving eligibility for essential government benefits like Medicaid and Supplemental Security Income (SSI).  

These carefully crafted arrangements help ensure your loved ones with special needs maintain access to necessary services while enjoying an enhanced quality of life through your trust’s supplemental support. 

Create a business succession plan 

Trusts can be instrumental in creating a smooth exit plan for family businesses. By establishing clear guidelines for ownership transfer, management succession, and operational continuity, a trust helps preserve the business you’ve built while minimizing disruption during ownership transitions.  

This structured approach can be crucial for maintaining business value and preventing conflicts among family members with varying levels of interest or involvement in the company. 

Minimize interpersonal conflict 

A well-structured trust can help prevent family disputes by clearly outlining your intentions and establishing a framework for asset distribution. By removing ambiguity and appointing a trusted fiduciary to oversee the process, you reduce the likelihood of misunderstandings or contested distributions that can damage family relationships during an already difficult time. 

Uphold your legacy 

Trusts allow you to extend your influence beyond your lifetime, supporting values and causes important to you. Whether establishing educational requirements for beneficiaries, supporting charitable organizations, or preserving family businesses, a trust can help ensure your legacy continues according to your vision for generations to come. 

How are trusts taxed? 

Understanding the tax implications of trusts is essential for individuals seeking to preserve wealth across generations.  

The taxation of trusts involves multiple layers of complexity, with different rules applying based on trust structure, income type, and beneficiary relationships. 

Types of tax affecting trusts 

Trusts may be subject to several types of taxation, each with distinct rules and rates.  

• Income tax applies to earnings generated by trust assets, including interest, dividends, and rental income.  
• Capital gains tax affects appreciation in trust assets when sold.  
• Estate taxes may apply to assets transferred into or out of certain trusts, while generation-skipping transfer tax specifically targets wealth transfers that skip a generation. 

Next, let’s review how different trusts are taxed.  

Taxation of revocable trusts 

Revocable trusts offer flexibility but limited tax advantages. Since the grantor maintains control, all income, deductions, and credits flow through to the grantor’s personal tax return.  

The trust essentially remains “invisible” for income tax purposes during the grantor’s lifetime. Upon death, assets in a revocable trust are included in the grantor’s taxable estate, though they avoid probate. 

Taxation of irrevocable trusts 

Irrevocable trusts can provide significant tax benefits by removing assets from the grantor’s estate. When properly structured, these trusts can reduce estate tax liability and provide asset protection from creditors and lawsuits.  

However, the tax treatment varies significantly based on whether the trust is classified as a grantor or non-grantor trust. 

Grantor vs. non-grantor trust taxation 

In grantor trusts, the person who created the trust is considered the owner for income tax purposes, meaning all income is taxed on their personal return regardless of who receives distributions. This arrangement can be advantageous as it allows trust assets to grow without being depleted by trust-level taxes. 

Non-grantor trusts are treated as separate tax entities with their own tax identification number. The trustee must file Form 1041, and the trust pays taxes on income it retains. Any income distributed to beneficiaries is taxed at their individual rates, with the trust receiving a corresponding deduction.  

Transactions between the grantor and a non-grantor trust are recognized for tax purposes, potentially triggering capital gains tax on appreciated assets. 

Specialized trust tax strategies  

We’ve talked about the fact that trusts can be tax-efficient wealth preservation vehicles, but what does this look like? 

Every person’s situation and goals is different but here are some general trust structures that can minimize taxes:  

• Generation-skipping trusts allow assets to pass to grandchildren without triggering estate taxes at the children’s generation 
• Dynasty trusts can potentially avoid estate taxes indefinitely across multiple generations 
• Grantor retained annuity trusts (GRATs) and qualified personal residence trusts (QPRTs) can transfer appreciation to beneficiaries with minimal gift tax impact 
• Charitable lead annuity trusts (CLATs) provide income to charities for a period before assets pass to family members, potentially reducing overall tax liability 

Strategic tax planning can help minimize tax burdens through techniques like: 

• Timing distributions to beneficiaries in lower tax brackets 
• Selecting tax-efficient investments within the trust 
• Utilizing deductions available to trusts 
• Implementing specialized trust structures designed for specific tax advantages 

And more. 

Remember, no two families are the same, making a custom estate planning strategy critical to maintaining your legacy and vision.  

Planning your trust with BPM 

Trusts are powerful tools for preserving wealth, protecting assets, and ensuring your legacy endures exactly as you envision. As we’ve explored, the right trust structure can help you avoid probate, minimize taxes, protect privacy, and provide for loved ones according to your specific wishes. 

With significant tax law changes on the horizon as exemptions are scheduled to sunset at the end of 2025, now is an ideal time to review your estate plan. BPM’s estates, gifts, and trusts team takes a proactive and strategic approach to help develop a plan that meets your expectations while demonstrating foresight in the face of changing laws. 

Ready to feel confident that your family and wishes are cared for? Contact BPM’s estate planning team today to build custom solutions that put your people first. 

Real estate investing offers many paths to building wealth, and savvy investors know that maximizing tax benefits can significantly enhance overall returns. Cost segregation stands out as one of the most powerful tax strategies available to property owners. This approach allows investors to accelerate and maximize depreciation deductions, improve cash flow and save significant amounts in income taxes.  

This article will explore the fundamentals of cost segregation, when to implement this strategy and how working with the right tax professionals can help you navigate the process effectively. 

What is cost segregation? 

Cost segregation is a tax planning strategy that allows real estate investors to identify and reclassify building components into shorter depreciation recovery periods. Rather than depreciating an entire property over the standard 27.5 years (residential) or 39 years (commercial), certain building systems and components can be reclassified to shorter 5, 7 or 15-year class lives. 

For example, certain types of flooring, lighting fixtures, plumbing, landscaping, paving, and specialized electrical systems may qualify for accelerated depreciation. The reclassification triggered by a cost segregation analysis frontloads depreciation deductions, reducing current tax liability and improving immediate cash flow; cash flow that can often be used to pay down debt, fund value-add renovation, or as capital for addition investment. 

When to consider cost segregation 

Cost segregation delivers the most value in specific scenarios: 

• Property acquisitions: When purchasing commercial or residential investment property with a building basis exceeding $1 million 
• New construction: During or immediately after completing construction projects 
• Renovations: When making substantial improvements exceeding $300,000 
• Previously purchased properties: Through “look-back” studies for properties placed in service in prior years 
• Basis step up event: When there has been a recent transfer of property that has resulted in a basis step up, oftentimes through a death or inheritance. 

“There is no limit to how far back Cost Segregation studies can look for properties acquired in prior years, but the benefits of accelerated depreciation do diminish over time, As such, many professionals in this field focus on properties acquired or improved within the last 15 years” – Mark Leverette, Partner, Assurance and Advisory  

The cost segregation process 

A professional cost segregation study typically involves four key phases: 

1. Feasibility analysis 

Before committing to a full study, tax professionals assess whether cost segregation will deliver meaningful benefits based on your tax situation and property characteristics. This preliminary analysis helps determine if proceeding with a complete study makes financial sense. 

2. Information gathering 

Your tax advisors will collect relevant property documentation, which may include: 

• Property condition reports 
• Appraisals 
• Site maps or surveys 
• Purchase documents 
• Construction drawings 
• Contractor invoices 
• Change order details 

3. Property analysis 

This phase involves a detailed examination of the property, either in-person or virtually, to: 

• Document building components with photos 
• Review construction plans and specifications
• Classify costs according to appropriate recovery periods
• Identify land improvements and personal property 

4. Final documentation 

The completed cost segregation study produces a narrative report containing: 

• Description of the project and scope of work 
• Detailed findings and tax savings calculations
• Outline of approach and methodology -applied
• Summary of key tax law references 
• Listing of asset classifications and recovery periods 

Tax benefits and considerations

Depending on property type and characteristics, cost segregation typically reclassifies 10-40 percent of a building’s depreciable basis into shorter-life assets. Multifamily properties and office buildings often yield higher reclassification percentages than industrial buildings. 

The accelerated depreciation creates larger tax deductions in early ownership years, which can: 

• Reduce current tax liability 
• Improve cash flow 
• Offset passive income 
• Create loss carryforwards 

However, investors should consider potential drawbacks: 

• Depreciation recapture may apply when selling the property 
• The study itself requires an upfront investment 
• Proper documentation is essential for IRS compliance 

Additional tax opportunities 

The detailed analysis performed during cost segregation often reveals other tax-saving opportunities: 

• Energy efficiency deductions: Properties built to energy efficient standards may qualify for a Section 179D deduction—up to $5.65 per square foot (for 2024) under the Inflation Reduction Act 
• Retirement loss deductions: When replacing building components in the future, established depreciation basis allows claiming “partial asset disposition” deductions 
• Cost recovery for tenant improvements: Identifying leasehold improvements that may qualify for accelerated depreciation 

Choosing the right approach 

The IRS Cost Segregation Audit Guide (“ATG”) identifies preferred methodologies: 

• Detailed engineering approach using actual costs 
• Detailed engineering cost estimates 

The ATG specifically discourages using simple “rule of thumb” methods, which lack reliability and supporting documentation.  Taxpayers who have tried to take a DIY approach to Cost Segregation have been met with mixed results and are often inconsistent with the requirements outlined in the Cost Segregation ATG.  A professional analysis will not only keep you compliant, but also usually produces significantly better tax outcomes. 

Working with BPM  

Implementing cost segregation strategies requires specialized knowledge and experience. BPM provides comprehensive cost segregation services tailored to your specific investment properties and tax situation. Our in-house specialists can work closely with you to identify opportunities, conduct thorough analyses and develop documentation support designed to withstand IRS scrutiny. 

By partnering with BPM for your cost segregation needs, you gain access to seasoned professionals with decades of specialty tax experience but also understand the nuances of real estate tax planning.   

Our Cost Segregation team can help you maximize your tax savings while maintaining compliance. We can guide you through each step of the process, from initial feasibility analysis to implementing the results on your tax returns, ensuring you capture every available tax advantage for your real estate investments. For more information, contact us.  

For defense contractors handling sensitive information, Cybersecurity Maturity Model Certification (CMMC) compliance is not just a regulatory requirement—it’s a critical business imperative. As cybersecurity threats continue to evolve, the Department of Defense (DoD) requires organizations throughout the defense industrial base to demonstrate robust security measures to protect Federal Contract Information (FCI) and Controlled Unclassified Information (CUI).  

This article explores the key steps organizations must take to achieve CMMC compliance, navigate assessment requirements and implement effective cybersecurity practices across their operations. 

Understanding CMMC fundamentals 

The CMMC framework, introduced by the DoD in 2019, strengthens enforcement of existing cybersecurity requirements. Unlike previous approaches that allowed self-assessment, CMMC requires independent verification through third-party assessments for most contractors. 

“Many try the self-assessment first, which is great, but also miss the CUI they do have and get in the wrong level. It is easy to at least have an Advisor review your self-assessment so that it does not become rejected. This is much less costly solution. You do it, have an Advisor review and advise, have more confidence that it is valuable.” – Sarah A. Lynn, BPM Advisory Partner, IT Security & Compliance Subject Matter Expert       

The framework consists of three compliance levels: 

• Level 1: Applies to organizations handling only FCI, requiring basic safeguarding measures outlined in FAR 52.204-21 with annual self-assessments 
• Level 2: Targets organizations handling CUI, requiring adherence to 110 security controls specified in NIST SP 800-171 with triennial third-party assessments
• Level 3: For organizations handling CUI under Advanced Persistent Threats, mandating compliance with Level 2 requirements plus 24 enhanced controls from NIST SP 800-172 

Organizations must achieve the CMMC level specified in their contracts, and this requirement flows down to subcontractors throughout the supply chain. 

Essential steps to CMMC compliance 

Assess your current security posture 

The first step toward CMMC compliance involves conducting a thorough assessment of your current cybersecurity practices. This assessment helps identify gaps between your existing controls and CMMC requirements. 

Start by determining which CMMC level applies to your organization based on the information you handle. Map your existing security controls against the relevant CMMC requirements, paying particular attention to areas such as access control, identification and authentication, system and communications protection and incident response. 

Document your findings in detail, noting areas of compliance and non-compliance. This documentation will serve as the foundation for your System Security Plan and Plan of Action and Milestones. 

Develop a comprehensive implementation plan 

Based on your assessment, develop a structured implementation plan to address identified gaps. Prioritize actions based on criticality and resource requirements, establishing realistic timelines for each task. 

Your implementation plan should include: 

• Specific technical controls to implement 
• Policies and procedures to develop or update
• Training requirements for staff 
• Resource allocation and budgeting 
• Timeline for completion with key milestones 

Remember that CMMC compliance is not a one-time effort but an ongoing commitment to cybersecurity. Your plan should account for continuous monitoring and improvement of security controls. 

Create required documentation 

Documentation plays a crucial role in demonstrating CMMC compliance. At minimum, you must develop: 

1. System Security Plan: A comprehensive document describing your information system, security requirements and implemented controls 

2. Plan of Action and Milestones: Details identified gaps, planned remediation actions, responsibilities and timelines 

3. Policies and procedures: Formal documentation of security practices aligned with CMMC requirements 

4. Evidence of implementation: Artifacts demonstrating that controls are in place and functioning as intended 

“Many companies do the assessment and stop not realizing that the DoD can ask for your other 4 LARGE type documents – SSP, POA&M, P&P and Artifacts at any time, even on a self-assessment. In addition, the on-going maintenance is very structured.” – Sarah A. Lynn 

The quality and completeness of your documentation directly impact your assessment outcome. Ensure all documents are clear, accurate and regularly updated to reflect changes in your security environment. 

Implement technical solutions 

Achieving CMMC compliance requires implementing appropriate technical solutions to protect FCI and CUI. This includes: 

• Secure email and file-sharing platforms that comply with DFARS 7012 
• Access control systems that enforce least privilege principles 
• Encryption for data at rest and in transit 
• Multi-factor authentication for critical systems 
• Continuous monitoring tools for threat detection 
• Backup and recovery solutions 

When selecting technology solutions, prioritize those designed specifically for CMMC compliance, as they often include pre-configured controls and documentation that can accelerate your certification journey. 

Prepare for assessment 

As your implementation progresses, begin preparing for your CMMC assessment. This preparation includes: 

• Conducting internal audits to verify control effectiveness 
• Training staff on security procedures and assessment expectations 
• Organizing evidence to demonstrate compliance with each requirement
• Performing mock assessments to identify and address potential issues 

For Level 2 and Level 3 assessments, engage with a CMMC Third Party Assessment Organization (C3PAO) early to understand their specific assessment methodology and expectations. 

Working with BPM for CMMC compliance 

Achieving CMMC compliance requires careful planning, comprehensive implementation and ongoing maintenance of cybersecurity controls. While the process may seem daunting, working with BPM can significantly streamline your compliance journey. BPM offers specialized guidance through each phase of CMMC implementation, from initial assessment to certification preparation, helping defense contractors protect sensitive information while meeting DoD requirements.  

By partnering with BPM, organizations can navigate the complexities of CMMC compliance efficiently and cost-effectively, ensuring continued participation in the defense industrial base supply chain. To find out more, contact us.  

When preparing for a potential M&A transaction, middle-market business owners often hear the terms “audit” and “quality of earnings” used interchangeably. However, these financial analyses serve fundamentally different purposes, and understanding the distinction is crucial for anyone considering selling their business.  

This article explores the key differences between quality of earnings reports and financial audits, explains why quality of earnings analyses are often more valuable in transaction scenarios and provides guidance on how to prepare for this important aspect of the M&A process. 

What is a quality of earnings report? 

A quality of earnings (QoE) report is a specialized financial analysis designed specifically for transaction purposes. Rather than focusing on compliance with accounting standards, a QoE analyzes the true economic earnings of a business by normalizing financial results and removing non-recurring or unusual items that might distort performance. 

The primary focus of a QoE is adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization), which serves as the foundation for most middle-market business valuations. By examining monthly financial data typically spanning three years plus the trailing twelve months, QoE providers can identify trends, seasonality and anomalies that impact the sustainable earning power of a business. 

Key components of a QoE report include: 

• Normalized EBITDA adjustments 
• Working capital analysis 
• Monthly performance trends 
• Business risk assessment 
• Transaction-specific financial considerations 

What does an audit provide? 

A financial statement audit serves a different purpose altogether. Audits are compliance-focused examinations that determine whether financial statements are fairly presented in accordance with Generally Accepted Accounting Principles (GAAP). 

Unlike QoEs, audits concentrate on reported financial results rather than normalized earnings. They typically review annual periods aligned with the company’s fiscal year and involve detailed testing of account balances and transactions to ensure material accuracy. 

An audit delivers: 

• An opinion on GAAP compliance 
• Verification of reported historical results 
• Assessment of internal controls 
• Annual financial statement validation 

QofE vs audit: Critical differences that matter in M&A transactions 

The distinctions between these financial tools become particularly important during business sale processes. While both provide valuable insights, they serve vastly different functions in the M&A context. 

First, QoEs focus on adjusted EBITDA—the metric most buyers use to value businesses—while audits focus on net income and GAAP compliance. Second, QoEs analyze monthly data over a longer period, providing deeper visibility into performance patterns than annual audit reviews. 

Perhaps most importantly, QoEs address transaction-specific concerns like working capital requirements and business risks relevant to potential buyers. Audits, while valuable for general governance and compliance, rarely address these transaction-critical elements. 

“In a perfect world, you would have both a QoE and an audit. However, time is often the enemy of M&A deals. By the time audits are completed, the information has become stale and reflects only year-end financial results, missing crucial transaction-specific insights.” – Craig Hamm, Partner – Advisory 

Why buyers value QoE reports in transactions 

In almost every middle-market M&A transaction, buyers conduct some form of financial due diligence regardless of whether audited financial statements exist. This happens because buyers require different information than what audits provide. 

Buyers primarily care about future earning potential and the sustainability of those earnings. A QoE directly addresses these concerns by: 

• Identifying one-time or non-recurring items that affect reported results 
• Analyzing owner compensation and discretionary expenses 
• Assessing customer concentration risks 
• Evaluating working capital requirements 
• Providing monthly trend analysis to spot seasonality or growth patterns 

This transaction-focused approach means buyers most often rely on QoEs for their financial due diligence rather than audits alone. Even companies with clean audit opinions typically undergo a QoE process during a sale. 

Strategic advantages of sell-side QoE reports 

While buyers commonly commission QoE reports during due diligence, forward-thinking sellers can gain significant advantages by conducting their own QoE before going to market. This “sell-side” QoE provides several benefits: 

• Identifies financial adjustments that enhance business value 
• Uncovers potential issues before buyers discover them 
• Creates more accurate financial expectations for the transaction 
• Accelerates the due diligence process 
• Strengthens negotiating positions on valuation 
• Reduces the risk of price reductions later in the process 

Preparing for a successful QoE process 
For business owners contemplating a future transaction, several steps can help prepare for a smooth QoE process: 

• Maintain detailed monthly financial statements 
• Document non-recurring expenses and revenues
• Track owner-related expenses separately 
• Implement consistent accounting practices 
• Retain supporting documentation for significant transactions
• Consider a sell-side QoE before marketing the business  
   

Choosing the right partner for transaction advisory 

Understanding the difference between quality of earnings and audits is essential for business owners considering a transaction. While audits serve important compliance functions, quality of earnings reports provide the transaction-specific insights that drive valuation discussions and facilitate successful deals.  

Working with BPM gives you access to professionals who can guide you through this critical process, helping to maximize value and minimize surprises throughout your transaction journey. To find out more, contact us.  

Blockchain technology continues to transform how businesses handle transactions and store data. As organizations increasingly adopt this technology, the need for thorough blockchain audits has become crucial for maintaining security and reliability in decentralized systems. 

What is a blockchain audit? 

A blockchain audit is a comprehensive evaluation process that examines the security, functionality and regulatory compliance of blockchain systems. This systematic review analyzes both the architectural design and underlying code to verify that all components operate according to intended specifications and remain free from vulnerabilities.  

“As blockchain networks grow more complex and interconnected, these audits serve as essential checkpoints for maintaining system integrity and preventing potential security breaches.” – Ryan Davis – Partner, Assurance 

Key components of blockchain audits 

The audit process consists of several critical elements that work together to create a comprehensive assessment: 

Technical infrastructure review 

Auditors examine the blockchain’s technical framework, including network protocols, consensus mechanisms and data storage systems. This includes analyzing the network’s scalability and performance metrics. 

Code analysis 

A detailed review of the programming ensures proper implementation and identifies potential security risks. This involves both automated scanning and manual code review processes. 

Security assessment 

Rigorous testing of security measures reveals possible vulnerabilities in access controls and encryption protocols. This includes penetration testing and threat modeling scenarios. 

Compliance verification 

Evaluation of the system’s alignment with relevant regulatory requirements and industry standards. 

Types of blockchain audits 

Blockchain audits generally fall into two main categories: 

1. Protocol audits focus on evaluating the fundamental blockchain infrastructure, examining the core technology that supports the entire system. These audits ensure the baseline security and functionality of the blockchain network itself. 

2. Smart contract audits concentrate on reviewing the self-executing contracts built on top of the blockchain. These assessments verify that the coded agreements function correctly and securely process transactions as intended. 

3. Benefits of regular blockchain audits 
   Organizations that implement regular blockchain audits experience numerous advantages: 

4. Enhanced security measures protect digital assets from potential threats and unauthorized access. Regular assessments help identify and address vulnerabilities before they can be exploited. 

5. Increased stakeholder confidence results from demonstrating a commitment to maintaining robust security standards. This trust builds stronger relationships with clients and partners. 

6. Regulatory compliance ensures operations align with current legal requirements and industry standards, reducing the risk of penalties or legal issues. 

7. Cost reduction occurs through early detection and prevention of potential security breaches or system failures. 

“The long-term benefits of thorough blockchain audits are crucial for maintaining security and reliability in decentralized systems.” – Ryan Davis 

The audit process 

A typical blockchain audit follows a structured approach: 

• Initial planning establishes the audit’s scope and objectives, creating a framework for the assessment process. 
• Technical review examines the blockchain’s architecture and implementation details. 
• Security testing identifies potential vulnerabilities through various testing methodologies. 
• Documentation review ensures all processes and procedures are properly recorded and maintained. 
• Final reporting provides detailed findings and specific recommendations for improvement. 

Meeting industry standards 

A comprehensive blockchain audit must align with established industry standards and best practices. This includes evaluating compliance with frameworks such as ISO 27001 for information security management and specific blockchain security guidelines developed by recognized industry bodies.  

Regular updates to audit procedures ensure coverage of emerging threats and new technological developments in the blockchain space. 

Why choose BPM for your blockchain audit 

BPM brings a wealth of blockchain knowledge and a proven track record in conducting thorough digital asset assessments. Our team maintains a current understanding of emerging technologies and evolving security threats, ensuring comprehensive protection for your blockchain investments.  

Our blockchain and digital assets team will work with you to develop a customized audit plan that addresses your specific needs and objectives. To schedule your blockchain audit and take the first step toward enhanced security and reliability for your digital assets, contact us.  

Estate planning is a crucial process that ensures your assets are protected and distributed according to your wishes, both during your lifetime and after your passing. While many assume estate planning is primarily for the wealthy or elderly, the reality is that everyone can benefit from having a comprehensive estate plan in place. 

Understanding your estate 

Your estate encompasses everything you own: real estate, vehicles, bank accounts, investments, life insurance policies, personal possessions, and business interests. Regardless of the size of your estate, proper planning helps ensure these assets are managed and distributed effectively while minimizing taxes and legal complications for your beneficiaries. 

What are the benefits of estate planning? 

Having a solid estate plan provides several key advantages. Here are some of them.  

1. Protects your loved ones 

The primary benefit of estate planning is ensuring that your family is taken care of after you’re gone. By naming beneficiaries, appointing guardians for minor children, and specifying how your assets should be distributed, you can provide financial security and peace of mind for your loved ones. 

2. Avoids probate 

Probate is the legal process of validating a will and distributing assets after someone passes away. In California, probate can be time-consuming, expensive, and public. A well-crafted estate plan, including tools like revocable living trusts, can help your heirs avoid probate and access assets more quickly. 

3. Minimizes tax implications 

Estate planning can significantly reduce your tax burden. Strategies like gifting, creating irrevocable trusts, and leveraging the federal estate tax exemption ($13.99 million per individual in 2025) can help you preserve more of your wealth for future generations. 

4. Provides for incapacity 

Estate planning isn’t just about what happens after you die. It also includes provisions for incapacity, such as durable powers of attorney and healthcare directives. These documents ensure that someone you trust can manage your finances and make medical decisions on your behalf if you become unable to do so. 

5. Protects your business 

If you own a business, estate planning is critical to ensuring its continuity after your death or retirement. Tools like buy-sell agreements, succession plans, and business trusts can help you transfer ownership smoothly and avoid disputes among heirs or partners. 

6. Preserves family harmony 

A clear and comprehensive estate plan can prevent misunderstandings and conflicts among family members. By specifying your wishes and addressing potential issues in advance, you can reduce the likelihood of disputes and litigation. 

Key components of a comprehensive estate plan 

Last will and testament 

A will serves as the foundation of your estate plan, providing instructions for the distribution of your assets. However, it’s important to understand that a will alone must go through probate—a court-supervised process that can be time-consuming and potentially expensive. Your will should also name guardians for minor children and specify an executor to manage your estate. 

Revocable living trust 

Many estate planning professionals recommend establishing a revocable living trust alongside a pour-over will. This powerful combination offers several advantages: 

• Helps avoid the probate process 
• Maintains privacy for your estate 
• Provides flexibility during your lifetime
• Allows for immediate access to assets by beneficiaries 
• Creates opportunities for tax planning 
• Enables continued asset management if you become incapacitated 

Essential legal documents for healthcare and finance 

Durable power of attorney 

This crucial document allows you to designate someone to manage your financial affairs if you become unable to do so. Your appointed agent can: 

• Pay bills and manage ongoing expenses 
• Handle investment decisions 
• File tax returns 
• Access and manage accounts 
• Apply for government benefits 
• Make financial decisions on your behalf 

Advance healthcare directives 

These documents ensure your medical wishes are honored and typically include: 

• Healthcare Proxy (Medical Power of Attorney): Designates someone to make medical decisions on your behalf 
• Living Will: Specifies your preferences for end-of-life care 
• HIPAA Authorization: Allows healthcare providers to share medical information with designated individuals 

Estate planning strategies for tax efficiency 

Strategic estate planning can help minimize tax burdens on your beneficiaries. As of 2025, you can give up to $19,000 per person annually without incurring gift tax through annual gift exclusions.  

Educational planning through 529 college savings plans offers tax-advantaged funding options for future generations. You can also consider making lifetime charitable donations for immediate tax benefits and explore various trust arrangements to optimize tax efficiency for your specific situation. 

When to review your estate plan 

Estate planning is not a one-time event. Your plan should be reviewed regularly, particularly after significant life changes. These include marriage, divorce, or remarriage; the birth or adoption of children or grandchildren; and the death of a spouse or beneficiary.  

Additionally, review your plan when you experience significant changes in financial circumstances, relocate to another state, or when tax laws change. Major financial events such as the purchase or sale of significant assets or changes in business ownership should also trigger a review of your estate plan. 

Common estate planning mistakes to avoid 

Being aware of potential pitfalls can help ensure your estate plan effectively serves its purpose. Many people fail to plan for incapacity or overlook important beneficiary designations on retirement accounts and life insurance policies.  

Another common mistake is not updating the plan after major life changes or maintaining improper asset ownership structures. Estate plans often fall short when they neglect to address potential long-term care needs or fail to consider state-specific requirements.  

Finally, failing to communicate your plans with family members can lead to confusion and complications later. 

The importance of professional guidance 

Estate planning involves complex legal, financial, and tax considerations. Working with experienced professionals helps to ensure your plan is legally sound and properly executed while being optimized for tax efficiency. 

Professional guidance helps align your plan with your specific goals and circumstances while maintaining compliance with current state and federal laws. 

Experienced advisors will also help make certain that your plan is regularly reviewed and updated as needed to reflect changing circumstances and regulations. 

Take action to protect your legacy 

At BPM, our estate planning professionals understand the complexities of creating and maintaining an effective estate plan. We work closely with you to develop strategies that protect your assets and provide for your loved ones according to your wishes. 

Don’t leave your family’s future to chance. Contact BPM’s Estate Planning team to schedule a consultation. Our experienced professionals will help you create a comprehensive estate plan tailored to your unique needs and objectives. 

Lost in the grant management wilderness? Angela Thomas, BPM’s Senior Manager – Advisory, walks you through how upgrading your ERP to Sage Intacct can improve your nonprofit’s financial management. 

“How do you survive without a basic game plan?”  This is the question my husband asks every time he watches Naked and Afraid.   

In my house, there’s a standing deal: if my husband gets to binge-watch his favorite survival show, Naked and Afraid, he’ll rub my feet. It’s a solid trade—especially because he can’t resist commentating on how utterly unprepared the contestants are. “They knew they were coming on this show,” he’ll say, shaking his head. “Why didn’t they learn how to make fire? Why didn’t they pack on some weight before starving in the jungle?  

The point is, you can’t wing it when the stakes are high. This is exactly what can happen when nonprofits take on federal grants without the right financial systems. Just like those contestants, they’re thrown into a complex, high-stakes environment where preparation is everything. And if they don’t have the right tools or knowledge? It’s a financial survival challenge—one that most organizations can’t afford to lose.  

And yet, nonprofits do this all the time when it comes to managing their federal grants. Millions of dollars get secured in funding but most often non-profits don’t have the right processes, systems, or safeguards to track it properly. It’s the financial equivalent of wandering through the wilderness, hoping for the best. 

Just like on Naked and Afraid, a lack of preparation leads to disaster—lost funding, failed audits, missed deadlines, and total financial chaos. 

The High Cost of Outdated Systems 

Federal grants come with strict compliance rules, and the price of mismanaging them is steep—both financially and in terms of an organization’s reputation and future funding potential. Here are five critical ways outdated financial systems can put your organization at risk: 

1. You Could Lose Grant Money ($100,000 – Millions Lost or Repaid) 

Imagine finally securing that big federal grant, only to find out you didn’t track expenses properly and now have to return a significant portion of the funds. This happens more often than you’d think, and it can cripple a nonprofit’s ability to operate. 

2. Compliance Failures = Costly Audits ($20,000 – $100,000+ in Expenses) 

An inaccurate or incomplete Schedule of Expenditures of Federal Awards (SEFA) report can trigger a single audit—where federal agencies go line by line through your books. Even if they don’t find fraud, a messy audit can cost tens of thousands of dollars and shake funders’ confidence. 

3. Missed Reporting Deadlines = Fines, Grant Denials, and More ($10,000 – $500,000+ in Risk) 

Miss a federal reporting deadline? That could mean not just losing current and future funding but also landing on a federal “high-risk” list — making it harder to receive grants in the future. These deadlines are non-negotiable, and without a system that automates tracking and reporting, even the most well-intentioned nonprofits can fall behind. 

4. Staff Burnout & Wasted Time (Priceless) 

Your finance team didn’t sign up to spend weeks drowning in spreadsheets. Manually tracking grants, juggling compliance, and correcting reporting mistakes leads to stress, burnout, and lost productivity. A strong financial system eliminates these headaches—freeing your team to focus on strategy and mission-driven work. 

5. Loss of Trust & Reputation Damage (Long-Term Impact on Fundraising & Growth) 

Funders don’t take financial mismanagement lightly. Even unintentional reporting errors can erode trust, resulting in fewer grants, hesitant donors, and a long-term hit to your nonprofit’s reputation. Your nonprofit’s credibility is one of its greatest assets—don’t risk it with outdated systems. 

Sage Intacct: Your Ultimate Survival Tool 

Just like Naked and Afraid contestants should never head into the wild without a fire starter, nonprofits should never manage federal grants without a financial system designed for compliance. That’s where Sage Intacct comes in. 

• Proven Leader for Nonprofits – Sage Intacct is ranked #1 in customer satisfaction for nonprofit accounting software on G2, with over 3,000 nonprofits relying on it. 
• Audit-Ready Reporting – Automates SEFA tracking and compliance, reducing audit risk and saving hundreds of hours in reporting. 
• Multi-Grant Tracking – Ensures funds are properly allocated, eliminating errors that could jeopardize future grants. 
• Real-Time Financial Insights – No more waiting until month-end to understand where your nonprofit stands. 

With the right system in place, nonprofits can stop just “surviving” grant management and start thriving. 

BPM: More Than Accountants—Your Nonprofit Success Partners 

At BPM, we don’t just help nonprofits with accounting. We live and breathe nonprofit finance.  

• As a Certified B Corp, we are deeply committed to organizations that serve others. Nonprofits are one of our most prevalent industries, and we have specialists in nearly every sub-service line—grant management, financial strategy, compliance, tax, and technology consulting. 
• We don’t believe in one-size-fits-all solutions. We take the time to understand your organization’s unique challenges and help you build a financial infrastructure that supports your mission. Whether it’s implementing Sage Intacct, streamlining grant tracking, or preparing for an audit, we’re here to make sure you have the systems and strategies needed to succeed. 

We work with nonprofit leaders who are incredibly smart, resourceful, and passionate about changing the world. They should be spending their time driving impact—not stressing over grant reporting issues. That’s why we care about helping nonprofits get their financial house in order—because when your finances are strong, your mission can thrive. 

Your Mission Deserves Better. Let’s Talk. 

If your current system feels like an outdated compass leading you in circles, it’s time for an upgrade. With the right financial tools in place, your nonprofit can move from merely surviving grant management to thriving—without the stress, compliance headaches, or financial uncertainty. Let’s talk about how BPM and Sage Intacct can help you stay on course, stay compliant, and stay funded — allowing you to focus on what truly matters: making an impact. 

(And if you ever need a good Naked and Afraid recap, my husband’s always ready to share his professional analysis.) 

Nonprofits play a vital role in our communities. They address critical social issues and provide essential services to people in need. But managing a nonprofit’s financials can be challenging, especially considering that many organizations have limited resources.  

This is where outsourced accounting for nonprofits comes into play. The right partnership can transform how mission-driven organizations manage their finances and focus on their core objectives.  

Partnering with an outsourced accounting team like BPM gives nonprofits access to expert knowledge and advanced tools without the overhead of maintaining a full-time, in-house accounting department. This allows them to ensure financial accuracy, compliance, and strategic financial management, so they can allocate more resources toward their mission-critical activities. 

Learn to make financial management a breeze in our outsourcing your accounting free guide.  

What makes nonprofit accounting unique? 

Before getting into the specifics of outsourced accounting, we need to understand the distinct financial challenges that nonprofits face. Unlike for-profit businesses that focus on maximizing shareholder value, nonprofits must carefully manage their resources to further their mission while maintaining transparency and accountability to donors, grantors, and regulatory bodies if they want to stay tax-exempt and publicly supported through grants, contributions and other funding sources. 

Nonprofit fund accounting 

Fund accounting is central to nonprofit financial management. In fund accounting, organizations track resources based on restrictions placed by donors or grantors, ensuring that funds are used as intended and reported accurately.  

Fund accounting involves: 

• Segregating resources into distinct funds based on donor time and/or purpose restrictions or board/management designations 
• Tracking revenue, expenses, restriction releases and net assets for each fund separately 
• Ensuring compliance with specific reporting requirements for each fund 
• Maintaining transparency in the use of restricted and unrestricted funds 

For example, a nonprofit might have a general operating fund for day-to-day expenses, a restricted fund for a specific program funded by a grant, and an endowment fund for long-term sustainability. Each of these funds must be managed and reported on separately, adding complexity to the organization’s financial management, and fund accounting allows them to keep all those funds aligned with their purposes. 

Expense reporting 

Nonprofits must track expenses in multiple ways and for different reasons, such as: 

• By donor restriction and/or board/management designation 
• By grant or major funding sources that require reporting 
• By functional category (i.e. different programs, general and administrative, fundraising, etc.) for IRS Form 990 tax reporting and financial statement reporting 
• By natural category (i.e. personnel costs, rent, utilities, travel, etc.) 
• By department, location or other method that organizational budgeting is derived 
• For indirect overhead cost allocations 
• Along with statistical information to provide reportable measures of impact and key performance indicators (KPIs) to the public 

The need for nonprofits to track the same dollar of expense six or more ways for different users and stakeholders requires thoughtful planning ahead when designing the structure of the accounting system. 

Compliance and reporting challenges 

Nonprofits face stringent reporting requirements from various stakeholders. Key stakeholders include: 

• The Internal Revenue Service (IRS) for maintaining tax-exempt status 
• State regulatory bodies for charitable solicitation compliance 
• Donors and grantors for fund usage and program impact reporting 
• Board of directors with fiduciary responsibilities for financial oversight and strategic planning
• Charity watchdog groups, such as Charity Navigator, GuideStar, Charity Watch, BBB Wise Giving Alliance, and others 

Each stakeholder imposes different requirements on a nonprofit organization, complicating the financial reporting process. To succeed, the team needs a deep understanding of nonprofit accounting principles, tax regulations, and industry-specific reporting standards.  

For many nonprofits, especially smaller organizations, maintaining this level of expertise in-house can be challenging and resource-intensive, making outsourcing an attractive alternative. 

The case for outsourced accounting for nonprofits 

Given the unique financial landscape of nonprofits, outsourced accounting offers several compelling benefits that can significantly enhance their financial management. This can result in a clearer view of available resources, and a more secure financial foundation from which to pursue the organization’s mission. 

Benefit 1: Access to specialized expertise 

Outsourced accounting firms that focus on nonprofits—like BPM’s own nonprofit accounting team—bring a wealth of sector-specific knowledge and experience. This expertise is crucial for navigating the complexities of fund accounting, compliance, and strategic financial management.  

Benefits of specialized expertise include: 

• Accurate implementation of nonprofit accounting standards (FASB ASU 2016-14) 
• Proper classification and tracking of restricted and unrestricted funds 
• Efficient preparation of IRS Form 990, state charity, and other regulatory filings 
• Strategic financial planning aligned with nonprofit best practices 

For example, an experienced outsourced accounting team might help a nonprofit properly allocate indirect overhead costs across programs, ensuring accurate reporting of program expenses. This can make an enormous difference when it comes to maintaining donor trust and meeting grant requirements. 

Benefit 2: Cost-effective financial management 

For many nonprofits, particularly small to medium-sized organizations, hiring a full-time, in-house accounting team with comprehensive nonprofit expertise can be prohibitively expensive. Outsourced accounting can provide nonprofits with access to a team of experts at a fraction of the cost of maintaining an in-house department.  

Potential cost benefits of outsourcing include: 

• Elimination of recruitment and training costs for accounting staff 
• Reduction in overhead expenses associated with full-time employees
• Access to advanced accounting software without direct investment 
• Scalable services that can grow or contract with the organization’s needs 

By outsourcing accounting functions, a nonprofit can redirect financial resources towards program delivery and mission fulfillment, potentially increasing its impact and effectiveness. 

Benefit 3: Enhanced financial transparency and donor trust 

Donors and grantors increasingly demand transparency and accountability in how their contributions are used. Outsourced accounting can significantly enhance a nonprofit’s ability to provide clear, accurate, and timely financial reports, building trust with stakeholders. 

Transparency benefits include: 

• Regular, professionally prepared financial statements 
• Clear tracking and reporting of restricted funds 
• Improved ability to demonstrate program efficiency and impact
• Enhanced capacity to respond to donor inquiries and audit requests 

For example, BPM’s outsourced accounting team might help your nonprofit create detailed reports showing how specific donations were used to further the organization’s mission, providing donors with concrete evidence of their impact. 

Key services offered by outsourced accounting firms 

Outsourced accounting firms typically offer a comprehensive suite of services. These can generally be tailored to the unique needs of the nonprofit in question. For example, one organization might need fractional leadership in addition to day-to-day bookkeeping, while another might need audit support and additional hands to help with reporting.  

Understanding which services are potentially available can help organizations determine which aspects of their financial management could benefit from external expertise. 

Financial record maintenance 

Outsourced accounting firms can manage day-to-day financial transactions, ensuring that all income and expenses are properly recorded and categorized. This could include: 

• Recording and categorizing all financial transactions 
• Reconciling bank and credit card statements 
• Managing accounts payable and receivable 
• Maintaining the general ledger and subsidiary ledgers 

For instance, an outsourced bookkeeping team can ensure that all grant expenditures are properly coded to the correct restricted fund, facilitating accurate reporting to grantors and simplifying the audit process. This can help the nonprofit remain grant-eligible, ensuring that future projects can be funded. 

Financial reporting and analysis 

Regular financial reporting is crucial for informed decision-making and stakeholder communication. Outsourced accounting firms can prepare a variety of financial reports tailored to the needs of different audiences within the nonprofit.  

Common financial reports include: 

• Monthly financial statements (Statement of Financial Position, Statement of Activities, Statement of Functional Expenses) 
• Budget-to-actual comparisons 
• Cash flow projections 
• Program-specific financial reports 
• Reporting of outcomes, KPIs, dashboards, and benchmarking 

Beyond just preparing these reports, outsourced accountants can provide valuable analysis and insights. For example, they might identify trends in donor giving patterns or highlight areas where expenses are outpacing budget projections, allowing the nonprofit to make timely adjustments to its financial strategies. 

Treasury and investment management 

• Development of Cash Management Policy  
• Creation of Investment Policy Statement (IPS)
• Investment Research & Due Diligence 
• Asset Allocation Guidance  
• Investment Management  
• Performance Reporting 
• Quarterly Meetings with Investment Committee 

Audit preparation and support 

Many nonprofits are required to undergo annual financial audits, either due to regulatory requirements or as a condition of grant funding. Preparing for these audits can be time-consuming and stressful, especially for organizations with limited internal resources.  

For nonprofits, outsourced accounting teams can provide crucial support in audit preparation, including: 

• Organizing and preparing all necessary financial documents 
• Reconciling accounts and resolving discrepancies 
• Drafting financial statements in accordance with GAAP 
• Serving as a liaison between the nonprofit and the auditors 

By leaning on the expertise of outsourced accountants, nonprofits can streamline the audit process, potentially reducing audit costs and minimizing disruptions to regular operations. 

Tax compliance and Form 990 preparation 

Maintaining tax-exempt status requires careful adherence to IRS regulations and timely filing of Form 990. Outsourced accounting firms with nonprofit expertise can ensure that these critical compliance tasks are handled accurately and efficiently.  

Tax-related services often include: 

• Preparation and filing of Form 990 and related schedules 
• State and local tax compliance, including sales tax and property tax exemptions
• Monitoring and advising on unrelated business income tax (UBIT) issues 
• Providing guidance on maintaining tax-exempt status 

For example, an outsourced accounting team can help a nonprofit properly allocate expenses between program services and management/general categories on Form 990, ensuring accurate representation of the organization’s efficiency to potential donors and regulators. 

Choosing the right outsourced accounting partner 

When selecting an outsourced accounting provider for your nonprofit, consider the following: 

• Nonprofit expertise: Look for firms with a proven track record in the nonprofit sector. For example, over the past 40 years BPM has worked with over 500 nonprofits across many different verticals, providing the team with deep industry knowledge. 
• Technology capabilities: Ensure they offer modern, cloud-based accounting solutions tailored to nonprofit needs. BPM, for instance, leverages platforms like QuickBooks, Sage Intacct, and NetSuite. 
• Customization: Your ideal partner should offer services that can be tailored to your organization’s specific requirements. 
• Communication style: Choose an accounting team whose communication aligns with your preferred style, frequency and method. 
• Compliance knowledge: Verify the team’s expertise in nonprofit-specific regulations and reporting standards, such as holding an AICPA Not-For-Profit Certification. 

With careful consideration, nonprofits can partner with an external accounting team that not only manages their finances effectively but also supports their mission and growth. 

Build a stronger financial foundation for your nonprofit mission 

Outsourced accounting for nonprofits offers a powerful solution to the unique financial challenges faced by charitable organizations. By leveraging external expertise, nonprofits can enhance their financial management, improve compliance, and ultimately focus more on their core mission.  

As you consider this strategic move, remember that the right outsourced accounting partner can be a game-changer for your nonprofit’s financial health and long-term success. And BPM can help. With a wealth of experience helping mission-driven organizations thrive—not to mention being a Certified B-Corp ourselves—the BPM team is well-positioned to help you navigate the complex nonprofit landscape.  

Contact BPM today to transform your nonprofit’s accounting and financial management. 

Compensation is a significant factor in your organization’s success, from attracting top talent to retaining valuable team members. As the workplace continues to evolve, creating a clear compensation philosophy has become more crucial than ever before.  

Pay transparency laws and changing workforce dynamics have pushed organizations to rethink how they approach employee compensation. Today’s employees want to understand not just what they earn, but how their compensation is determined. This article explores the essential elements of developing a strong compensation philosophy and how it can transform your organization’s approach to total rewards. 

The foundation of compensation philosophy 

A compensation philosophy serves as your organization’s framework for making decisions about employee pay and benefits. This strategic approach fosters transparency by including all compensation elements, from base salary to bonuses, health benefits, paid time off and other perks that make up the total rewards package. 

Many organizations operate with an unwritten compensation philosophy, which can create confusion on how pay is set. Creating an intentional, documented compensation philosophy helps not only ensure fair treatment across all levels of your organization but provides a guiding document that can be used by HR, leaders and managers. 

Aligning Compensation Philosophy with Culture and Strategic Goals 

YYour compensation philosophy must align with your organization’s culture and strategic objectives to be truly effective. This alignment creates coherence between what you say you value and how you reward employees. 

Cultural Reflection 

The way you compensate should reinforce your cultural priorities, and align to the driving forces that make your organization great.  Leaders should consider their values, and how they can foster the desired environment. Some examples of this may be 

• Collaborative cultures that emphasize team-based incentives 

• Innovation-focused organizations that reward creative contributions 

• Companies valuing work-life balance offering flexible benefits packages 

Strategic Support 

Compensation directly impacts your ability to achieve business goals.  By tying your strategic vision to goals and rewards, you are able to align your employees naturally.  this can be done by: 

• Attracting and retaining talent aligned with your growth strategy 

• Supporting long-term vision through appropriate incentive structures 

• Creating sustainable practices that match your financial model 

Leadership Alignment 

Developing an effective compensation philosophy requires consensus among top leadership. Without this alignment, leaders may not understand the implications of certain communications to employees, which creates inconsistent implementation and can undermine any work towards transparency. 

Key components of an effective compensation philosophy 

Your compensation philosophy should align closely with your organization’s values and mission. Consider these vital elements: 

• Total rewards package: Define how your organization approaches the complete compensation picture, including base pay, bonuses, benefits and additional perks. Sharing this comprehensive view helps employees understand the full value of their compensation package.  

• Market positioning: Determine where your organization wants to position itself in terms of compensation compared to your competitors. This includes analyzing both industry-specific data and local market conditions.   

• Pay structure: Establish clear salary ranges and bands that provide transparency while maintaining flexibility. Document how employees can progress through these ranges based on pay factors such as performance, experience, skills and other factors. 

Strategies to help make your compensation philosophy work 

Implementing an effective compensation philosophy requires careful planning and consistent execution. Consider these strategies: 

Regular review cycles 

Revisit your compensation philosophy annually to ensure it remains aligned with market conditions and organizational goals. More frequent reviews may be necessary during periods of significant change. 

Communication strategy 

Develop clear methods for creating, aligning, and sharing your compensation philosophy with leadership and then employees. This transparency helps build trust and ensures everyone understands how pay decisions are made.  

The impact on employee engagement 

A well-designed compensation philosophy directly influences employee engagement and retention. When employees understand how their compensation is determined and see clear paths for growth, they’re more likely to remain committed to your organization. 

Recent studies show that jobs with transparent pay ranges attract significantly more applications than those without salary information. This transparency not only aids recruitment but also helps maintain employee satisfaction over time. 

Addressing compensation philosophy challenges 

Even the best compensation philosophy faces challenges in implementation. Common hurdles may include:

• Market fluctuations: Economic changes can impact your ability to maintain planned compensation levels. Your philosophy should include guidelines for addressing these situations. 
• Internal equity: Balancing market demands with internal pay equity requires ongoing attention and adjustment. 
•  Budget constraints: Organizations must find ways to align their compensation philosophy with financial realities while maintaining competitiveness. 

Working with BPM  

As your organization develops or refines its compensation philosophy, partnering with BPM’s HR Consulting team can provide valuable insights and support. Our Compensation team has vast experience advising and developing compensation structures and support.  We understand the complexities of modern compensation strategies and can help you create a philosophy that drives success.  

We work closely with organizations to develop comprehensive compensation approaches that align with their values while meeting market demands. To begin transforming your compensation philosophy into a strategic advantage for your organization today, contact us.