NFPs are critical to the fabric of Australian society, and at Accounting For Good, we wish we could provide our services to all of them. However, NFPs with a turnover of less than $750,000 to $1,000,000 find high-level financial accounting services cost-prohibitive. This by no means diminishes the value of their contribution or mission, and in this article, we aim to provide those NFPs practical insights to help the organisation navigate the complexities of NFP financial reporting.
Financial services to look for
Smaller NFPs with a turnover of less than AUD $1M should seek financial services tailored to their specific needs. When choosing a financial service provider, seeking an accountant or advisor with experience in the not-for-profit sector is important. They’ll understand your organisation’s unique tax concessions, compliance obligations, and reporting standards.
Ensure the services offered are scalable to your size and future growth. A provider should be able to assist with bookkeeping, payroll, ATO lodgements such as BAS, and generating reports that can be used as grant acquittals.
NFPs in this bracket operate on tight budgets. Find a service provider offering packages designed for organisations of your size or transparent pricing for specific services and activities.
If your NFP must submit an independent audit or review to the Australian Charities and Not-for-profits Commission (ACNC), ensure the provider can facilitate this process. Some providers may NOT be able to provide audit or review services due to licensing or independance reasons. You may need to source this from other another organisation.
What are the essential elements of NFP financial reporting?
Accurate and timely financial reporting is necessary for accountability and decision-making. The ACNC and other regulatory bodies have specific requirements for NFPs, so staying on top of these obligations is essential.
NFP organisations generally must prepare financial statements that comply with Australian accounting standards. However, this may depend on who the regulator is, and full compliance may not be required. It is critical to understand the legal and governance requirements specific to your organisation.
If registered with the ACNC, small charities (turnover under $500K) must submit an AIS annually. Medium-sized charities ($500K–$3M turnover) and larger charities ($3M Plus turnover) must also include reviewed or audited financial statements. Even if not required, small charities do benefit from voluntary reviews to ensure financial accuracy.
Ensure detailed records of grant income and expenditure are kept. Funding bodies often require acquittal reports demonstrating that funds were spent as intended.
Develop, review, and update a budget when there is a significant change. This will help your NFP understand if it keeping up with its goals. Regularly monitor cash flow and ensure your organisation remains financially sustainable.
Understanding and meeting your accounting and compliance requirements is non-negotiable for NFPs. Falling short in these areas can jeopardise funding, credibility, and even your organisation’s charitable status.
Most NFPs are eligible for tax concessions. These include income tax exemption, GST concessions, and fringe benefits tax (FBT) exemptions. Check your eligibility with the ACNC and the Australian Taxation Office (ATO).
Maintain clear and detailed records for all transactions, including invoices, receipts, payroll records, and bank statements. Digital solutions like accounting software such as Xero can simplify this process.
Understand the governance standards. The ACNC governance standards require NFPs to:
- Purpose and not for profit nature
- Accountability to members
- Compliance with Australian laws
- Suitability of responsible people
- Duties of responsible people
- Maintaining and enhancing public trust and confidence in the Australian not for profit sector
If your organisation employs staff, comply with all payroll obligations, including PAYG withholding, superannuation contributions, and Single Touch Payroll (STP) reporting. With increasing scrutiny around wage theft, even when unintentional, ensure systems and processes are in place that reduce the potential for error. Accounting software such as Xero will assist in maintaining compliance.
Tips for financial health
To ensure your NFP remains financially healthy, consider these tips:
- Automate Financial Processes: Use accounting software designed for small organisations, such as Xero. Automation reduces errors and saves time.
- Mark key compliance dates on your calendar to avoid penalties. For example, the ACNC AIS is due by 31 December for charities reporting on a standard financial year.
- Aim to set aside a portion of your surplus each year to create a financial buffer for unexpected expenses or revenue shortfalls.
- Involve your board members in financial planning and oversight. Regularly update them on the organisation’s financial status to encourage transparency and accountability.
- Seek free and low cost webinars and education sessions run by organisations in the NFP space. The ACNC, the ATO and Not For Profit Law are often active.
- When in doubt, consult a professional accountant or advisor who specialises in the not-for-profit sector.
By understanding your reporting needs, compliance obligations, and the importance of expert guidance, you can build a solid foundation for your organisation’s future. Even the smallest NFPs can achieve big results with the right tools and advice.
At Accounting For Good, we work with NFP organisations with a turnover of $1M or more.
Contact us for a free consultation if your organisation needs expert financial guidance. Let us handle your accounting needs so you can focus on what matters most—serving your community and driving positive change.
