There are many types of organisations out there (one of the reasons I enjoy bookkeeping), and not-for-profits are one type of organisation in particular that require a special approach to their bookkeeping.
• Terminology – Terms such as “profit” and “loss” are usually replaced with “surplus” or “deficit”.
• Complex budgets – Broken down into many different departments or auxiliaries. Essential for decision-making and helps keep organisational spending on track.
• Asset purchase – Often recorded as an expense, with adjustments made at the end of the financial year to transfer the amounts to the correct asset accounts.
• Special tax concessions – Available for some registered charities in Australia. For example, income tax exemption.
• Cash handling – A lot of trust put in volunteers, who may be handling large amounts of cash. Do you have good internal control procedures in place to reduce the risk of theft and lost money? For some tips on internal controls, refer to my previous tips in Reducing the risk of fraud and error in small business.
• Non-Profit Sub-Entities – Treated separately to the rest of the organisation in relation to GST.
Who said bookkeeping is boring? Always something new to learn, particularly if you are a newly appointed Treasurer or Bookkeeper.
Have I missed something important that you have found to be different with not-for-profits? Please join the conversation and add your comments below.