Australia's Leading Bookkeeping Specialists For Non-Profits

Our bookkeepers can offer customised advice to save tax for your small business. However, there are some golden rules which are applicable universally such as using a tax filing software which ensures maximum efficiency and accuracy as well as gets refunds. Also, you must have the receipts for all the expenditures to get deductions on your taxes. You can also save tax by treating the equipment as business expenditure for the year in which it was purchased to minimise depreciation. Also, the deductions made on charitable contributions can be carried over to the next year if they are not fully utilised in the current year.

Not-for-profits may not be working for a return on their investment, but they are definitely generating an income and need capital and funds to sustain the organisation and carry on with the charity work. A steady cash flow is required to manage the operations and accomplish the mission of the organisation. Thus, financial management and record keeping becomes a significant aspect of functioning which ensures that the goals are achieved in a strategic manner. Maintaining accurate financial records helps in monitoring the cash flow and measuring the success of the endeavours undertaken by the NFP. The financial statements are also required for presentation at the time of annual general meetings and for filing tax returns. It is easier to track the efficiency of the NFP through these statements. Besides internal use, these statements are also necessary for the acquittal process of the funding agencies both private and government. Additionally, these documents are a part of the governance obligations that every NFP has to fulfil in Australia. A bookkeeper can help in recording accurate transactions using a financial management software which is customised to suit the needs of the NFP. The accountant must keep track of the five essential aspects of capital – assets, liabilities, revenue, expenditure, and equity. These documents supply information to both the funding parties and those who are benefitting from the services of the organisation. It gives a clear idea about how the not-for-profit has discharged its duties related to the management of the resources and conformed to the legislations. The financial data is quite useful in the evaluation of the status of the NFP by a donor or a grants commission. It can help them in the decision-making process of donating. The NFP must get the statements audited independently to stress on the legitimacy and accuracy of the records for the assistance of the donors. The financial statements for every NFP may differ in their structure and format as all of them are involved in diverse domains and their organisational set-ups are different from each other. These documents depend a lot on the needs of the stakeholders and the legislation compliance as well as the regulations that the not-for-profit has to follow. The three main records that every organisation needs to create are balance sheet, income and expenditure statement and the statement of cash flows. All of them should be generated every month to examine the achievements and make improvements if required. The balance sheet talks about the assets (things owned by the NFP), liabilities (amount payable to external stakeholders) and the equity (accumulated funds in the balance sheet generated from the operations of the NFP). When you subtract the liabilities from the assets, you can find out the net worth of the organisation. Thus, when you deduct the amount owed to external parties from the assets, you get the value of the NFP. The income and expenditure statements are relevant in understanding the allocation of funds to manage the operational expenses during a set time period. Similarly, the cash flow statements talk about the movement of money in and out of the organisation. It can make the donors aware of the warning signs and help in making informed decisions.

Non-commercial business losses can be offset against income (salary or return on investment) in the same financial year by a sole trader or one of the partners in a partnership. If you are unable to offset the losses in the current year, you can defer it to the future years when you will hopefully be making profits. So you can easily offset the losses against the profit generated in the future. However, you must be able to meet the requirements listed down for non-commercial losses. You can refer to the list on the Australian Taxation Office Website.

To increase receivables, you need to get the payments from your customers on time. This means that all the invoices should be generated in time and proactively followed up by the bookkeeper to get the money into the company account. The cash-flow will automatically increase when the incomings will be higher than the outgoings. Also, a robust tracking system will help you by informing about the pending payments from suppliers who can pay using credit cards to avoid late payments. Plus, the company should pay all the bills on time to steer away from paying late fees.

To understand the financial health of the organisation, you need to study the incomings and outgoings in the financial statement carefully. You will have to evaluate whether the expenditure matches the allocated budget and whether the earning meets the expectations or not. If the estimates and actual figures are close enough, then the company is doing well.

Investing wisely can reap a lot of benefits for an NFP. Most NFPs do not think over this aspect of financial management and simply put their money in term deposits. However, the better way to deal with this is to diversify your investment portfolio. You must find out low-risk investment vehicles that are socially relevant and align with your company’s ideology, instead of investing in some risky and greedy commercial organisation. A wrong association can tarnish your image as a non-profit, so consult a bookkeeper to find a sound investment option that works in your favour.

Cash flow statements are relevant for big charitable organisations which have many assets and substantial daily spending. A cash flow statement assists in keeping track of the day-to-day spending. It helps in understanding the flow of cash into the company and the amount going out so that you are better equipped to pay all the invoices on time and get the receivables in your account to avoid any shortfalls. A bookkeeper will help you to create a cash flow budget for the next year so that you can manage the finances accordingly.