Cosmetology Schools
Seeking Accreditation
It All Starts With Good Books
Schools Seeking Accreditation
Prepare your school for the rigorous process of accreditation with step-by-step guidance on transitioning to accrual accounting, creating compliant policies, and meeting financial standards required by accrediting bodies.
Schools Seeking Accreditation
Accounting and Compliance Requirements
Transition to GAAP: Schools must prepare financial statements under GAAP as part of the accreditation process..
Accrual Accounting Setup: Shift from cash to accrual accounting to accurately match revenue with expenses.
Composite Score Monitoring (1): Calculate and monitor the composite score regularly to meet the 1.5 threshold.
Composite Score Monitoring (2): Adjust expenses or contributions to boost equity if the score is below requirements.
Budget-to-Actual Reports: Establish a system to compare actual results against projected budgets.
Deferred Revenue: Start to properly record unearned tuition revenue to comply with accreditation standards.
Financial Statement Audits: Prepare for an initial audit by ensuring all transactions are recorded and documented correctly.
Schools Seeking Accreditation
Compliance Preparation
NACCAS Requirements:
Align revenue categorization with accreditation standards (e.g., tuition, grants)..
Prepare policies for refunding unearned tuition if students withdraw.
Audit Preparation:
Perform mock audits to identify weaknesses before the actual accreditation audit.
Collect and organize supporting documentation for transactions.
Schools Seeking Accreditation
Internal Control
Enhanced Controls: Introduce segregation of duties and implement approval workflows.
Monthly Reconciliation: Ensure regular reconciliation of all financial accounts, including deferred revenue..
Revenue Tracking: Track tuition payments by student, and set up a deferred revenue account for unearned income.
Access Controls: Set up restricted access to financial systems to authorized personnel only.
Schools Seeking Accreditation
Policies and Procedures
Accreditation-Specific Policies (1): Write policies for revenue recognition, student refunds, and expense categorization aligned with GAAP.
Accreditation-Specific Policies (2): Create a tuition payment policy outlining payment deadlines, installment plans, and penalties for late payments.
Internal Controls Documentation: Develop a formal internal controls manual to document segregation of duties and approval processes.
Staff Training: Train staff on compliance, bookkeeping best practices, and preparing for audits.
Frequently Asked Questions
Q:
What are the key financial requirements for accreditation?
Schools seeking accreditation must maintain financial records prepared under GAAP, implement accrual-based accounting, and track deferred revenue accurately. Additionally, accrediting bodies like NACCAS require a minimum composite score of 1.5, so monitoring financial health is crucial.
Q:
How long does it take to prepare financially for accreditation?
The timeline depends on your current financial practices. If your records are disorganized or not GAAP-compliant, preparation could take several months. Working with an experienced accountant can help streamline the process and ensure you meet accreditation deadlines.
Q:
Why is deferred revenue important for accreditation?
Deferred revenue reflects tuition that has been collected but not yet earned. Accurately tracking deferred revenue ensures compliance with financial standards and shows that your school is properly managing its finances, which is a key requirement for accreditation.
Q:
What policies and procedures should we have in place for accreditation?
Accrediting bodies require documented policies for tuition collection, refunds, internal controls, and financial reporting. These policies demonstrate that your school has established systems to manage finances responsibly and comply with accreditation standards.
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This website is dedicated to helping cosmetology schools thrive through proper financial management. Whether your school is accredited, non-accredited, or preparing for accreditation, maintaining accurate and compliant financial records is the key to sustainability and growth. The resources and information provided here are designed to simplify accounting, strengthen internal controls, and guide schools toward meeting their financial and accreditation goals. For personalized support, schedule a consultation today.
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