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not for profit

Is your profit and loss accounting up to date?

Businessperson Calculating Invoice With Calculator In Office

In the lead up to 30 June there are always a lot of accounting tasks that require your attention. But one of the most critical is reviewing your profit and loss (P&L) reports in relation to your funding and all related projects.

Are your income and expenditure in line with your budget? If they’re not… why not?

Carol Tran, one of Accounting For Good’s Account Managers, discusses some of the useful steps you can take at the end of the financial year to minimise errors and determine if you need to take any action before you close your accounts for FY20-21.

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Where do you start?

It’s quite possible that when you look at your P&L reports, everything on the surface seems OK, but it’s important that you investigate properly to make sure your accounts are in order. Carol explains,

“You have to really understand exactly where you are right now… check your contract as to where you are supposed to be when you look at funding versus spending for the year. That will help you identify if you have a gap that you need to fill.

This is particularly important if you have multiple funding channels and multiple projects. You need to review every single one individually. When you look at everything together it might appear OK… but if you have ten separate funders it could be the case that five may be overspent and the other five may be underspent. Collectively, your accounts look fine when everything is put together… but really none of them are OK.”

Business manager working in office talking on phone

Contact your suppliers

If you do find that there is a gap and you still have some money left to spend, the first step you can take is to contact your suppliers. Carol continues,

“We are so close to the end of the year, so it won’t be easy to spend a lot more if you still have funds available… but at least you can work out how much there might be left over.

A practical tip is to speak with your suppliers. You can ask them to submit their invoices for June as soon as possible… sometimes they might want to submit them in July and even date them in June – but if you talk to your accountant, they can usually help you accrue that cost in the correct period.”

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What if something is wrong?

“Sometimes mistakes happen and we understand that. It’s possible that there could be errors in allocations that make your accounts appear incorrect… it might seem as though you haven’t properly spent your money. If this is the case, you will need to talk to your accountant about it. You will need to work together and look at all the details.

Your accountant should be your first point of call. They will be able to determine where the errors lie and put you on the right track. They will be able to guide you if there is scope to fix the accounts when something is wrong. 

Or on the other hand, they can advise you if there is no opportunity to ‘fix’ because you actually haven’t spent your funding. If this ends up being the case, you need to talk to your funder to discuss the situation.”

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Talk to your funders

As soon as you identify a discrepancy, it’s crucial that you speak to your funder. Historically, unspent grant funding has to be returned or is deducted from next year’s allocation. While there was some leniency last year due to the impact of the COVID pandemic, this year we already know that funders have tightened their expectations.

“If you are facing a worst case scenario and you can’t spend all your money, then we recommend speaking to your funder immediately. You can discuss with them the possibility of a roll over into next year. 

Your funder doesn’t want to be surprised when the audit report comes out or when you do your acquittal, which is still a couple of months away. If you wait until that point, they probably won’t be able to give you any leeway.”

Seek professional help

Here at Accounting For Good we have over 25 years’ experience supporting not for profit organisations. Our team of NFP accounting specialists understands the complexity of the sector and we know how to reduce the pressure of EOFY accounting tasks.

We can help you get your accounts in order and prepare for audit season, so if you have any questions, please contact us today. Read more not for profit accounting articles.

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