Bookkeeping for non-profit organisations: How software can provide the ideal solution

Discover how bookkeeping software provides non-profit organisations with an easy alternative for effectively planning, accurately recording, and correctly reporting your finances.

Not all non-profit organisations have the expenses to hire a trained accountant or treasurer to look after the books each year.

But with the legal regulations to abide by and potential scrutiny to avoid, the responsibility of these essential bookkeeping services can be left in the hands of the trust, regardless of your experience or credentials to account for your organisation’s finances.

In this blog, we discuss how new bookkeeping software helps charities or churches offer a safe, efficient, and affordable solution that helps streamline your accounting and satisfies regulations.

What are bookkeeping services?

In a nutshell, bookkeeping services rely on businesses or organisations recording financial transactions and activities. Summarising these accounts accurately and efficiently helps non-profit organisations keep their finances on track while adhering to legal regulations.

Depending on the operation of your non-profit organisation, you can expect to complete the following duties with your bookkeeping services:

·       Maintaining financial records

·       Account management (Receivable and payable)

·       Gift Aid claims

·       Reconcile financial statements with bank statements

·       Budget and cash flow analysis

Most charities and churches in the UK will be exempt from tax on most income if the money gets spent on charitable purposes. However, depending on your organisation, preparing tax returns might be another service to add to your bookkeeping list.

Why is bookkeeping for non-profit organisations important?

Updated on the 26^th of April 2023, the ‘Internal financial controls for charities’ sets out the essential checks and procedures for charity trustees to oblige and maintain.

Due to the tax exemptions and other distinguishing factors for non-profits, all financial transactions must go through dedicated accounts. To ensure all your financial activity gets recorded correctly, an integral part of these internal financial controls is bookkeeping services.

After all, how can you expect to protect your assets, meet legal duties, and make informed decisions without accurate financial reports?

Therefore, bookkeeping helps non-profits plan, record and report their finances by incorporating the required accounting principles. However, these bookkeeping skills are not always readily available, especially in a sector that relies heavily on voluntary assistance.  

Without a trained accountant, bookkeeping for non-profit organisations can prove challenging. But there is a solution in the form of technology.

Bookkeeping software for charities and churches

Thankfully, with technological advances, bookkeeping for non-profit organisations has become easy and safe with intelligent and intuitive software.

Beyond typical accounting software for commercial purposes, bookkeeping software for charities and churches can accommodate specific requirements that non-profit organisations require.

So, if you’re looking to invest in this accounting alternative, you can expect the following services:

·       Tracking and management of Gift Aid, donations, and overall expenses.

·       Fund accounting or restricted funds.

·       Report compilation and invoice generation.

·       Payroll management.

·       Receipt scanning and bank feed capabilities.

All in all, your bookkeeping software should help you record all receipts, contributions and donations alongside expenditures and payouts with any petty cash transactions, payroll and accounts receivable/payable.

As an advance on typical bookkeeping solutions, you should aim for software that accommodates fund accounting capabilities. Fund accounting enables your non-profit organisations to use different accounts for different purposes, which is crucial with the strict financial regulations in place.

These differing accounts can include the following categories:

1.     Restricted funds

Restricted funds are your finances spent on specific projects and activities within your organisation.

2.     Temporarily restricted funds

Temporarily restricted funds are your finances spent on specific projects and activities within a defined deadline. When this time limit has passed, they become unrestricted funds.

3.     Unrestricted funds

Also known as “annual funds”, unrestricted funds can be spent on any aspect of your organisation that needs it.

Another important rule in non-profit accounting is the non-distribution constraint. This regulation requires all charities and faith organisations to not pay their leaders unfairly with net earnings, even if those finances exceed expectations.

Invest in bookkeeping software for your non-profit organisation