As a not for profit organization you have a mandate to achieve certain goals. The money that is available to your not-for-profit organization is essential for reaching the goals, and a quality bookkeeping system is essential to keep track of and manage that money. Since the funds are such an essential part of keeping your organization running, it is essential that certain not-for-profit accounting factors are considered carefully.
Selecting a Bookkeeper for a Not-for-Profit Organization
Each organization needs to appoint or select a treasurer who has the duties of recording all financial transactions and preparing the necessary financial statements. In larger organizations, the treasurer may wind up delegating some of these tasks to a committee made up of several members.
Gather the Proper Accounting Tools
Once the bookkeeper is selected, it is essential they have the proper not-for-profit accounting tools to get the job done. This includes access to the financial statements, understanding of the control procedures and journals to record information regarding the organization’s finances in. Many not-for-profit organizations find it useful to use accounting software to facilitate this.
Keeping Financial Records
It is essential that all financial records are kept for a period of at least six years after the end of the actual taxation year. Then it is okay to destroy them. However, there are certain records that should never be destroyed, including meeting minutes, private and general journals, share registers, and other special agreements or contracts.
Financial Journals for Not-for-Profit Organizations in Canada
In Ontario, not-for-profit organizations are required to keep three different journals for recording financial information:
- A receipts journal
- An expenditures or disbursements journal
- A petty cash journal
All not-for-profit organizations should have a current account that issues prenumbered cheques. This account should have a minimum of two signing officers designated when opening the account. Both signing officers will have equal responsibility for the organizations funds. All financial transactions for the organization should go through the bank account. Cash should never be sued to directly pay a bill. Accounts should be reconciled monthly.
A financial statement will need to be prepared at the end of each financial year. You may also create financial statements throughout the year to monitor your budget. The following financial statements should be prepared:
- Income and Expense Statement
- Balance Sheet
- Changes in Financial Position
All not-for-profit organizations should have a written budget that outlines how the organization will work toward its financial goals. It is recommended that an operating budget is prepared annually. It is also recommended that a cash flow statement and capital budget are prepared. These budgets should be monitored throughout the year to assess if your organization is meeting its financial goals.
The role of the bookkeeper is to ensure that the finances are always balanced and that members of the organization understand what is available to work with to meet their goals. Creating budget sheets and financial outlooks are also a role that bookkeepers will have. In most cases, it is essential that the person has prior accounting experience, which will provide them with the ability to accurately keep records for the not-for profit organization. If you need help with bookkeeping services for your not for profit organization, call Hogg, Shain, and Scheck at 416 499 3100 today.