Starting an NFP: Managing Financial Reporting with the right accounting software

Running a not-for-profit (NFP) organisation in Australia comes with its fair share of financial responsibilities. Whether you're new to the NFP world or launching a new organisation, there’s a lot to look forward to as you make a positive impact in your community.

One of the critical aspects to get right from the start is managing your financial reporting.

Accurate record-keeping, taxation reporting, and compliance with government regulations are essential to maintaining the integrity and sustainability of your operations. This is where a robust and powerful accounting platform, can make all the difference.

Let's take some time to understand the importance of proper financial management for any NFP before exploring how the right software can help.

The Importance of Proper Financial Management for NFPs

Setting up an NFP involves more than just a passionate vision and people coming together to make it a reality; it requires meticulous financial management to ensure your organisation runs smoothly and transparently.

It's a common misconception to believe that just because the organisation's legal structure is "NFP" it should be financially disadvantaged or managed that way. Having a reliable accounting system is vital to keeping the doors open for your operations. Otherwise, your dream may end before it begins if you struggle to focus on managing financial viability.

Record-Keeping Obligations

Maintaining detailed and accurate records of all transactions is fundamental for any organisation. This includes tracking every source of income and documenting all expenditures meticulously. Here’s why it’s so important.

Income Tracking for:

• Donations: Record every donation received, noting the donor’s information, the date, and the amount. This not only ensures transparency but also helps in acknowledging donors and building lasting relationships. For instance, if a major donor contributes $5,000, detailed records can help in recognising their generosity publicly or in donor reports.

• Grants: Grants often come with specific conditions and reporting requirements. Keeping detailed records of how grant funds are received and spent is crucial for compliance. This helps in demonstrating to grant providers that funds are used as intended, which is essential for future grant applications.

• Fundraising Events: Documenting income from fundraising events includes ticket sales, sponsorships, and auction proceeds. This ensures that the financial success of these events is fully accounted for and transparent to all stakeholders.

• Commercial Activities: Many NFPs engage in commercial activities to generate additional income. It is important to keep this income separate from donations and grants. Separate accounting for commercial income also ensures compliance with tax obligations and provides clear insights into the profitability of these activities.

Expense Documentation for:

• Operational Costs: Keep track of every operational expense, such as rent, utilities, and office supplies. This helps in understanding the cost of running the organisation and identifying areas where expenses can be optimized, removed or better managed.

• Program Expenses: Document expenditures related to specific programs or projects. This is essential for reporting back to donors and grantors about how their funds are being utilised.  Often this will couple with an audit or acquittal that requires a detailed breakup of expense categories. For example, if funds are allocated for a community outreach program, detailed records will show how much was spent on materials, transportation, and other related costs.

• Payroll and Benefits: Accurate records of payroll, including salaries, superannuation, and other benefits, are necessary for legal compliance and financial planning. This ensures that all employee-related expenses are transparent and accounted for.

Transparency and Accountability Reporting to Members

Proper record-keeping is the backbone of transparency and accountability in an NFP. It builds trust with donors, stakeholders, and regulatory bodies by providing a clear and detailed account of how funds are managed.

This transparency is key to securing ongoing support and funding. For example, when presenting an annual report, having detailed financial records allows the NFP to show exactly how contributions were spent, reinforcing donor confidence and encouraging future donations.

Taxation Reporting

NFPs must navigate complex taxation rules, including GST obligations and payroll requirements. Ensuring compliance with these regulations is essential to maintain your tax-exempt status and avoid legal issues.

GST Obligations

NFPs must register for Goods and Services Tax (GST) if their annual turnover exceeds the GST registration threshold (currently $150,000 for NFPs). This involves:

• collecting GST on taxable supplies

• identifying and applying GST correctly on each transaction including any transactions that are GST exempt or a GST concession applies to

• preparing and submitting a Business Activity Statements (BAS) regularly

• tracking and paying the net GST obligations to the ATO

Proper management of GST is crucial to avoid penalties and ensure compliance.

Payroll Reporting Requirements

If an NFP employs staff, it must comply with payroll reporting legislation imposed by State and Federal Governments. This can involve:

• Paying wages under the applicable Award or NES

• Reporting payday information to the ATO via the Single-Touch-Payroll (STP) system

• State-based payroll tax and/or portable long-service leave levies

• Workers' compensation and Director/Committee insurance

• Reporting and payment of superannuation by strict deadlines via super-stream

Proper management of the payroll environment and associated reporting and payment obligations is crucial to avoid penalties and investigations into payroll mismanagement.

Income Tax Exemptions

Many NFPs are eligible for income tax exemptions, which means they do not have to pay income tax on their earnings. However, to maintain this status, NFPs must self-assess eligibility each year and in some cases submit documentation evidencing this to the ATO.

Government Reporting with ACNC

Compliance with regulatory bodies like the Australian Charities and Not-for-profits Commission (ACNC) is mandatory for all NFPs in Australia. This entails meeting various reporting and record-keeping requirements to ensure transparency, accountability, and continued eligibility for tax-exempt status.

• Annual Financial Reports: Every registered NFP must submit annual financial reports to the ACNC.

• Maintaining Detailed Records: To meet the ACNC’s requirements, NFPs must maintain detailed and accurate records of their financial transactions and activities.

How the right accounting software can help your NFP

There are thousands of accounting and payroll packages out there, but they are not all built the same or compliant with Australian NFP reporting requirements.

To get you off the starting blocks correctly you need to choose the one that is going to serve your needs the most and has room to grow as your needs grow.

A GOOD accounting and payroll system offers a suite of features tailored to the needs of NFPs, helping you manage your financial reporting and compliance with ease.

A GREAT system grows with you and does not stop your operations from expanding simply because you need to fix the outdated and clunky backend first.

Choosing the right software can:

• Streamlined Financial Management: intuitive platform allows you to effortlessly manage your income, expenses, and cash flow. With real-time updates, you can keep your financial records accurate and up-to-date from the start.

• Automated Reporting: automating your financial reporting, making it easy to generate and share comprehensive reports with your board members, donors, and regulatory bodies. This ensures you remain compliant and transparent.

• Compliance Support: Navigating regulatory requirements can be tricky. But a robust system integrates seamlessly with the Australian Taxation Office (ATO) and the ACNC, helping you submit required reports and stay compliant with ease.

• Resource Efficiency: By automating many of your financial tasks, you save valuable time and resources. Automation features can handle repetitive tasks such as invoicing, billing, and payroll processing, reducing manual effort and minimizing errors. This means you can focus more on your core mission and less on paperwork.

• Anywhere Access: Cloud-based software is here to stay and is the new norm, so you can manage your finances from anywhere. Gone are the days of having a server or physical central point that kept your team and operations limited to one place. Whether you’re in the office or on the go, cloud-based accounting lets you have the flexibility to stay on top of your financial affairs anywhere in the world!

• Integration and automation: robust integrations with a wide range of third-party applications, such as payment gateways, CRM systems, and project management tools. These integrations allow you to streamline various aspects of your operations and ensure that all your financial data flows seamlessly between platforms. This integrated approach supports your NFP’s growth and provides scalable solutions as your organisation expands without interuptions.

  
  

How can Numerex help you?

At Numerex, we understand the unique challenges faced by NFPs. We’re here to provide you with the support and expertise needed to select the right accounting system and set up, implement, and maintain your financial management system.

Our services include:

• Software selection: We help you make sense of the noise by telling you what software suits your needs without the marketing hype and sales bull.

• Setup and customisation: We’ll help you set up and customise from scratch, ensuring your accounting package is tailored to meet the specific needs of your NFP. This is great for those who are new to or nervous setup process and want a hands-free approach.

• Implementation: If you or your team can DIY and want us to hang in the wings for guidance only, that's fine with us. This is a great option for those with an established and skilful finance team, so you can keep the costs down and take control over the areas you desire internally. We work with your staff to ensure a smooth transition and minimal disruption to your operations.

• Ongoing Maintenance: We provide ongoing support to keep your system running smoothly, including regular training on newly released features or troubleshooting.

• Training: We offer comprehensive training for your staff, ensuring they are confident and capable of using the system effectively.

Are you ready?

Starting an NFP is a rewarding journey, and with the right financial management tools and support, you can ensure its success and sustainability.

Let Numerex be your trusted partner in navigating the financial complexities, so you can focus on making a positive impact in your community.

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