The experts in
not for profit

Why you need an NFP accounting expert

Female accountant writing on documents at desk in office

Non-profit organisations are different. They aren’t focused on commercial gains; they are driven by a purpose. They are dedicated to providing services and supporting their community. They are run by inspirational people who want to make a difference and they are always working to achieve their goals.

When it comes to managing the financials of a not for profit (NFP), it can be a challenging task for people without the necessary accounting skills. In fact, it can even be difficult for a commercial accountant to navigate the nuances.

With over 25 years of experience in the NFP accounting space, we have comprehensive knowledge of how not for profits – charities and associations – operate. And today we highlight some of the key reasons why you need an NFP accounting expert.

Folder with documents accounting standards

NFP accounting standards

As with all types of accounting, the Australian Accounting Standards Board has a strict set of accounting standards that must be followed. Being well versed in these standards is critical for any accountant providing services to a non-profit organisation, as there are specific elements that apply to NFPs.

As an example, AASB 1058 relates to income recognition for not for profit entities and was designed to clarify and simplify requirements so they more closely reflect the economic realities of NFP transactions.

There have also been changes to standards that have implications for NFPs. And again, it is crucial that an accountant working with non-profits understands the complexities of the standard and how to apply the changes.

Payroll processing taxation

Understanding NFP taxation

Taxation is another area of accounting where there are unique circumstances for NFPs. For most non-profit organisations, there are tax exemptions and concessions.

One of the most significant relates to income tax. Unlike commercial businesses that have to pay income tax on profits, most NFPs are exempt from this obligation. Charities that are registered with the ACNC automatically receive this exemption through the registration process. Other non-profits can visit the ATO’s website to self-assess their eligibility for income tax exemption.

It is also common for NFPs to receive a GST concession. Kirsten Forrester, Accounting For Good CEO, explains,

“The not for profit concession includes a higher threshold for GST registration. Non-profit organisations register for GST at the revenue threshold of $150,000 rather than the standard $75,000.

They can also choose whether they report their GST on a cash or accrual basis, regardless of their turnover. This is different for commercial enterprises… if their turnover is above the threshold of $10 million, they must report on an accrual basis.”

NFPs may also be eligible for deductible gift recipient status and they could receive fringe benefit tax concessions.

Spreadsheet bank accounts accounting with calculator and magnifying glass

NFP income and reporting

The source of not for profit income varies greatly to that of a commercial entity. Whilst some NFPs do sell goods and services to utilise the earnings for their specific purposes, the majority of funding is very different to that of the private sector.

An accountant working with a non-profit organisation needs to understand how income streams such as grants or fundraising work. Kirsten says,

“Grants may come with specific guidelines around the use of funds and the NFP would have contractual obligations to fulfil.

And with fundraising, the organisation turns to the public to raise money. They might run a media campaign, a door knock, a street appeal, a mail out, an online campaign… or a specific event. Or they might seek a corporate sponsor.

Securing a stable income stream is important. Most NFPs are governed by a board or a management committee that has governance oversight of the organisation and is charged with setting strategic direction. With that comes a level of financial responsibility for each of the directors.”

This is where strategic advice and quality reporting are essential in order to sustain the organisation… and only an NFP accounting expert can provide you exactly what you need.

Accountant pointing at financial document in her hand

Talk to us today

We are Australia’s leading accounting experts in the non-profit sector. And we understand all facets of the financial constraints, compliance, regulatory and governance requirements faced by NFPs. We know that budgets are tight and regulations are strict. Funding and fundraising are competitive and reporting requirements stringent.

Not for profit accounting requires unique understanding and experience, and here at Accounting For Good, our team has been supporting the sector for over two decades. Contact us today if you would like more information about our services.

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