Friday, 20 Sep 2024
Non-profit or not-for-profit organisations in Australia are created to benefit society and accomplish a greater good. Individuals set up these types of entities to serve communities and work for a social cause. Some prominent names in the field are The Royal Botanical Garden Sydney, which works for environmental sustainability, and Invisible Illnesses, which operates in the health and well-being sector. The benefits offered by non-profits are used by common people who are plagued by problems and are struggling to get out of them.
Non-profits work like any other business that can make profits but they cannot use this money for personal gains. It must be utilised for the cause chosen by the entity. It can be saved for reinvestment in the non-profit or building a cash reserve for stability. These entities have to maintain their finances and lodge income tax returns if applicable. Here is how non-profits can navigate their unique bookkeeping challenges. These tips can help them maintain compliance and financial stability.
Non-profits can receive grants and sponsorships from the government, private funds, businesses, or foundations. However, before applying for grants, the non-profit must check whether it can get funding from the government and businesses. Grants are short-term funding but may be accessible only to registered charities. If the grant is received, the non-profit has to comply with the terms and conditions of the grant-maker.
They also have to pay GST if they pay the grant-maker something of value in return. Bookkeepers can keep track of the conditions set by the grant-maker and ensure they are fulfilled while utilising the funds. This usually involves using the funds as directed, returning the surplus amount, and reporting the use of funds to the grant-maker.
Non-profits must generate income to continue working towards their goals and managing their operations. They must maintain records of income and expenses to understand their financial standing and make informed decisions. Thus, they must track all transactions and maintain up-to-date records with the help of non-profit bookkeepers in Melbourne who specialise in this service.
Since the income of these entities is different from that of businesses because of grants, funds, and other sources, they need an expert to manage their finances and comply with state regulations. They need to showcase their financial records to stakeholders and use them for filing taxes. The professionals record the movement of cash and track assets, liabilities, revenue, equity, and expenditures.
Most non-profits face the challenge of increasing overheads due to the capital needed to build infrastructure and maintain operations. They have to pay the employees, purchase equipment, bear the expense of utilities and property leases, and pay legal fees. They have to train the staff and implement new tech to become more efficient. All these activities lead to an increase in expenses.
Effective bookkeeping can help these entities save money. The professionals can identify new donors and fundraising opportunities. They can make the non-profit stick to the budget and manage the cash flow by sending invoices on time and preventing late payments. They can also negotiate with vendors to get materials at discounted prices.
Many non-profits receive in-kind donations, which must be recorded according to the Australian Accounting Standards Board (AASB) regulations. Bookkeepers in Melbourne can help these entities record in-kind donations in the chart of accounts. They must be recorded as both debit and credit, and their fair market value must be determined accurately.
In-kind donations must be recorded as assets until they are used by the non-profits. These can also include volunteer work, which must be calculated at $20 per hour and at $45 per hour for specialised work. The non-profit must preserve the written records of the in-kind donations, such as receipts and letters of donations.
Some non-profits in Australia have to file income tax returns. Entities must identify whether they must lodge income tax or notify the ATO of non-lodgement advice. This can be understood with the help of a bookkeeper who understands NFP structures and their tax compliance regulations. Many are exempt from taxation, while others have to meet the requirements.
Social clubs, hospitality service-based clubs, political parties, etc., are taxable non-profits. Taxable entities also have to determine whether they can use the mutuality principle while calculating their taxes. Non-charitable non-profits with an ABN must submit an annual NFP self-review return to the ATO to inform them about their eligibility to self-assess income tax exemption.
Non-profits with employees have to manage payroll, understand PAYG withholding, perform single-touch payroll reporting, and manage superannuation. It can be challenging for them to keep track of everything while making sure to pay the workers. Hiring a professional Melbourne bookkeeper helps streamline payroll management.
They use accounting software to ensure accurate salary credits and super calculations. They also withhold amounts from payments to contractors and lodge reports to maintain compliance.
Bookkeeping challenges impact businesses and non-profits. These entities work towards social good but have to keep track of their income and expenses while following their obligations. They must have the support of a professional to overcome financial issues and stay profitable.
