Record-keeping for treasurers

A computer system is not a substitute for paper records. Make sure you keep a hard copy audit trail of all your financial transactions, including receipts, chequebook stubs and tax invoices. You could be audited by the Australian Tax Office at any time.

Also ensure you make regular back-ups of your computer records. Hard drives do crash, and data does get lost. Keep your back-ups offsite, so they are safe in the event of a fire or burglary.

Very small organisations can get by with what's called 'shoebox' accounting with all accounts kept in a box or filing cabinet. Try to organise your material into folders, large envelopes or separate compartments of a folder for separate items such as:

  • Correspondence
  • Bank statements
  • Outstanding bills
  • Paid bills and receipts
  • Asset file with instructions and guarantees
  • Lease file for equipment and rental hire
  • Insurance
  • Cash book - record of your cash receipts and payments
  • Statutory information - constitution, budget and minutes

One step up from shoebox accounts is a ledger or a journal of income and expenditure. You can use books for ledgers, develop your own spreadsheet or use commercial software. Information in ledgers will include:

  • Date
  • Receipt number (if appropriate)
  • Who was paid
  • Who paid the money
  • Purpose
  • Account
  • Amount

You will need to organise your income and expenditure by category. Let's look at the most common types of ledgers - assets, liabilities, equity, and income and expenditure.

You may also have separate ledgers for large projects and fund-raising events.

Assets - what you have

There are two types of assets - current assets and non-current or fixed assets. If the asset is expected to remain in your organisation for more than one year, treat it as a fixed or non-current asset.

Current assets are assets you use in your everyday operations or assets you intend to dispose of within the next 12 months. They include:

  • Money in the bank
  • Money owed to you
  • Items you intend to sell or give away within 12 months
  • Cash

You receive the benefits from your non-current assets over a longer period of time. These include assets you own or lease, such as cars or computers.

The wear and tear on these assets in daily use means their value declines. Your accounts need to show this depreciation, in other words, how much value your assets have lost.

Fixed assets can be further classified into tangible assets - land and buildings, plant and machinery, fixtures, fittings and vehicles, and intangible assets - investments, goodwill, patents, trademarks and royalties.

Liabilities - what you owe

Your liabilities are what your organisation owes for goods or services. Again, there are two types - current or non-current. Current liabilities, which need to be paid in the near future, include bank overdraft, suppliers who have provided goods or services, payments to employees, including superannuation and PAYG, taxation, finance leases and short-term loans. Non-current or long-term liabilities are sources of finance supplied to your organisation, which are not due for repayment in the next 12 months. They include: long-term loans, finance leases payable beyond one year, and long-term loans.

Equity - your net worth

Equity is your organisation's net worth. It is what your organisation would be worth if you cashed up today. It includes accumulated funds and reserves, which you have put aside as a backstop.

Revenue - what you get

Revenue is the total income your organisation receives and includes membership fees, grants, donations, sale of products and services, special events, consulting fees and sponsorships.

Income and expenditure

You need to distinguish between operating and capital expenditure.

Operating expenditure is money you use to run your organisation and includes overheads, salaries, supplier bills and maintenance.

Capital expenditure is money you spend on items that will last longer than one year, such as computers, furniture and equipment, cars, land and buildings.

Operating and capital expenditure are treated differently as the cost of the capital expenditure is spread over the expected life of the asset. If the whole cost was put into one year's accounts, you would have a distorted view of your profit and losses. So a depreciation charge is made against the income each year.

For example, if your organisation bought equipment for $40,000 and you expect it will last five years, you would have an annual depreciation charge of $8,000.

Income, such as grants received for future activities, is not taken into account in your profit for the current period. Even though it is shown as cash in your bank statement, you must treat it as a liability in your balance sheet.

If you are not registered for the goods and service tax (GST), you do not need to record GST separately in your accounts. If you are registered for GST, when you record your income it should not include GST. Likewise, your expenditure will not include the tax input credits you are entitled to.

The GST components should be recorded separately as amounts you will pay and receive from the Australian Taxation Office.

Tracking the cash

When receiving cash, you will often provide people with receipts (standard receipts books are available from newsagents or stationery shops). While receipts are not always appropriate, you should count the money at the end of each event (or at regular intervals), and record how much you have collected and what it was for.

Here are some keys for tracking cash:

  • Count and bank cash promptly (many ATMs take deposits after hours).
  • Never pay wages or expenses from cash waiting to be deposited.
  • Keep a petty cash box for small items such as stamps and parking (keep an upper limit on how much can be spent on any one item - above that figure, pay by cheque or online banking transfer so you have a record). Petty cash should last a month and needs to have enough so you don't run out, and not too much that it becomes a security risk. Document all petty cash spending through vouchers or a book, and get receipts if possible.

Your bank statements are important financial records. Ask your bank for statements that finish at the end of a month as this will make it easier for you to reconcile your accounts. It sounds obvious, but unless you request it, you may find your bank statement starts according to the date you opened the account.

A bank reconciliation is a schedule that explains the differences between the bank statement balance and the company's cash balance. Your bank statement may not equal your cash records because of timing differences, un-presented cheques, and other information not in your cash records, such as interest paid or received.

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