Here are some more of the details you need to be aware of when managing the accounting records for your not for profit. By now you are probably thinking “I’m sure Robin Hood didn’t have to do all this” and you would be right but remember that his world (while dangerous) was not as involved as ours. And it was less “legal”, too!
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  • Make sure any journal entries that are required to be posted are done as needed.  Often these happen at the end of the year as part of the end of year balance day adjustments but they may also need to be done at the end of the month.
  • You may receive recurrent funding from the government that is paid each month so you need to reconcile and track that this income is being received.  This also becomes very important when you receive multiple grants that can come in at different times.  By referring to the funding agreement you need to be clear when the payments are due, for example, some may be monthly, quarterly or one off, and that the correct amount has been received.
  • In addition to tracking the income from grants you need to maintain accurate records to track the expenditure as well as the unspent funds.   The expenditure and unspent funds are not the same thing.  For example, you may have received a $50,000 grant for a particular project and spent $30,000, or 60% of the grant, but only completed 20% of the project.  If this occurs then you may face a significant liquidity and solvency problems and as a result you may be faced with the prospect of using non grant funds or operational amounts to cover this shortfall.  Furthermore, if you don’t have proper accounting records to accurately track these amounts then when the funding is received in advance it significantly increases the bank account and gives the impression that the organisation has plenty of funds when in fact the funds are linked to specific projects.
  • If you receive membership, subscriptions or other types of fees you must be able to know who has paid, when they paid and for what period of time.  While this can involve a lot of transactions, most accounting packages make this easy to handle and manage.
  • Often overlooked as it relates to minor amounts is the petty cash system.  Irrespective of the size of your organisation, never underestimate the importance of keeping proper controls in place for your petty cash and that it is properly managed.  Refer to the recent post on Managing Petty Cash for more details.  Each time the petty cash float is replenished it must be reconciled and, especially for smaller organisations, any non compliance should be reported and acted on to avoid it occurring in the future.

That is enough for today.  Go and digest this information and be ready for the final part tomorrow.