Bookkeeping for small charity organisations

You may not seek a profit as a charity organisation, but your finances still keep you running. Without organised books, you may not raise and manage the money you need to help your cause. Plus, it’s even more important for nonprofits to prove where their money goes since you don’t keep it for yourself. Because of this, it’s crucial to have strong bookkeeping practices. 

Bookkeeping is the process of recording business transactions, like sales and expenses. This process helps you track what you earn and spend on your business to understand your performance. In addition, bookkeeping enables you to compile necessary financial statements for taxes. 

But bookkeeping can often seem overwhelming and confusing. Luckily, there are simple ways to manage bookkeeping for charity organisations. 

This guide will cover bookkeeping for charity organisations, including: 

• Recording transactions
• Tracking cash flow
• Sending invoices  
• Preparing for taxes
• Finding accounting software 

The first step in strong bookkeeping for charity organisations is to record your expenses regularly. Make sure you put time into your day to update any donations you receive or any revenue you earn. Then, track expenses, which could be anything from an event budget to stocking a charity shop. Keep proof of your invoices and receipts to look back to if you miss something or need proof of a transaction.

It can be challenging to track these expenses and earnings if your business finances overlap your personal ones. Opening a business current account can help you separate these transactions to easily record and find them. 

You can compile your bookkeeping in a physical ledger or keep everything updated in a spreadsheet on Microsoft or Google. Having it updated both on paper and online can cover your bases if anything gets lost or damaged. 

Having a clear record of the additions and subtractions of your business finances can help you prove where the donations you receive go and who they help. Plus, analysing these numbers will help you budget for your organisation and know when to cut down on expenses to provide more charity. 

Along with recording transactions, you’ll need to track your charity organisations cash flow, which is different from your revenue. Cash flow is the amount of cash that comes in and out of your organisation over a given time. 

You may not see the cash that you earn for your organisation frequently. This can be especially true if you give your clients the typical 30 days to pay an invoice. Also, if you rely on governmental or external funding, money may come infrequently. A lack of cash hurts your organisation’s working capital, or the amount of money you have to pay short term expenses. 

Even as a charity organisation, you likely have regular payments such as shop rent, stock, or insurance fees. Poor cash flow to pay for them could make it hard to pay these to stay afloat. By tracking your cash flow closely and compiling a cash flow statement, you’ll see when to shift your methods. You can also be aware of excess cash, which you can put towards growth to benefit your cause. 

Another important part of bookkeeping for charity organisations is sending and receiving invoices to ensure that you bring in cash. Invoices are documents that businesses send to clients after a sale or service to request payment. This is different from a receipt, which is proof of a transaction. 

Since creating and sending invoices are crucial to your organisation’s earnings, consider establishing a system. This system will help you track your invoices, including those customers have yet to pay. If you follow your invoices closely, you can be sure to earn what you work for towards your cause.  

As a charity organisation, you may experience late payments, reducing your organisation’s cash flow. If that’s the case, check out our guide on following up on late payments. 

As a charity organisation, you may not have to pay taxes on most of your income as long as it goes towards charitable causes. To prove your money is tax-exempt, you’ll need to keep accurate financial records and statements for tax purposes to show where your money goes. 

When it comes to filing taxes for your charity organisation, clear records will enable you to put together a profit-loss statement or income statement. This statement outlines what you earned and where it went. 

You may need to pay taxes if you received non-tax relief eligible income or spent any of your income on non-charitable purposes. If this is the case, you’ll need to complete a tax return. Learn more about taxes for charitable organisations on the UK government website.  

To stay on top of your bookkeeping, you’ll need the right accounting software to streamline this process and save you time. Financial management can be stressful and time-consuming when you’re self-employed. That’s why thousands of business owners use the Countingup app to make their financial admin easier. 

Countingup is the business current account with built-in accounting software that allows you to manage all your financial data in one place. This makes the bookkeeping process easier so you can focus on helping your cause. Plus, the built-in tools will help you better understand your finances.

With the Countingup app, you can create and send unlimited invoices on the go. Even more, Countingup will notify you when you receive the invoice and automatically match it to a payment. With this feature, you can save time tracking your money and better understand your revenue. 

Aside from helping with invoices, the Countingup app has automatic expense categorisation with HMRC approved categories, which can help you record and fine expenses. There’s also a receipt capture tool to quickly store proof of expenses. This tool is crucial for charity organisation reporting to show where you spend your money. With these features, you can confidently keep on top of your organisation’s finances wherever you are.

The app generated year-round tax estimates so you can plan for anything you may have to pay and avoid surprises. Though you may not have to pay taxes as a charitable organisation, if you do it’s good to know when to put money aside for them. You can also share your bookkeeping with your accountant instantly without worrying about duplication errors, data lags or inaccuracies. Seamless, simple, and straightforward! 

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