How-to Guides - Community Resource Kit

financial record keeping

treasurer's roles and responsibilities

The treasurer is the person on the board or committee who takes overall responsibility for the financial management of an organisation on behalf of its governing body. The amount of work involved for the treasurer will depend on the size and type of organisation and on whether there is a financial administrator on staff who can carry out some of the tasks.

To help with his or her duties, the treasurer should have:

Checklist of treasurer's overall duties

A treasurer takes responsibility for the financial management of the organisation. The treasurer carries out the following overall duties:

• sets up and oversees bank accounts on behalf of the organisation (most organisations have a cheque account, a savings account, and term deposits)
• ensures money received is receipted and banked promptly
• invoices anyone who has purchased goods or services (rentals, use of equipment, membership fees etc) from the organisation
• signs cheques on behalf of the organisation (at least one other person should co-sign the cheques)
• make payments as required (see the next page for more details)
• maintains accurate records of income and expenditure
• files GST and tax returns
• keeps an accurate wages book and makes PAYE payments as required (where there are paid employees)
• prepares annual budgets for the forthcoming year
• manages a cash flow record and also the organisation's investments e.g. term deposits and property management (in association with the committee)
• maintains an appropriate accountability system for grants received
• prepares and presents monthly financial reports for management meetings
• prepares accounts for auditing and provides information for the auditor as required
• prepares and presents the Annual Financial Report to the Annual General Meeting/Hui-ā-Tau.

Checklist for making payments

In addition to the overall duties (just mentioned), when making payments, the treasurer should make sure that:

• all payments are made by cheque (or direct debit) and on time – the exception is for small items paid out of petty cash
• there is a proper GST invoice before making payment – it’s easier to get the supplier to issue a correct invoice if they haven’t yet received the payment (see the sample of a proper GST invoice)
• all invoices are checked for accuracy before making payment – also check that the goods or services have been received (tick off items listed on the packing slip/invoice) and that they are satisfactory
• volunteers' out-of-pocket expenses are always paid promptly
• there are two cheque signatories when making payments – this should be expressly included in the organisation’s constitution
• file invoices in cheque then date order.

financial records

Many of the major problems for organisations arise from poor record keeping of financial transactions. The treasurer must be able to provide documentary evidence of every transaction made in order to prove the validity of his or her records and to satisfy the auditor (if an audit is required).

The treasurer (and/or financial administrator) is responsible for maintaining the following records (which are dealt with in more detail below):

• subs or membership register (in the case of clubs)
• receipt book for monies received
• a file for keeping your income invoices and paid accounts
• petty cash book
• an accounting system (preferably a computerised package e.g. MYOB) to account for all transactions.

The treasurer (and/or financial administrator) is also responsible for maintaining the following (which are dealt with in various parts of this section or other parts of this kit as indicated):

• financial statements i.e. statement of financial performance (profit and loss) and statement of financial position (balance sheet) – see later section 'Financial Reporting'
• budgets – see earlier section 'Financial Planning'
• PAYE returns – see later section 'Tax Matters'
• GST returns and calculations – see later section 'Tax Matters'
• funding applications – see Section 7 – Raising Funds.

Receipt book

When cash is received, a receipt must be issued to the payer which records:

• the date
• name of payer
• amount received
• what the money is for (e.g. sub, donation etc).

Filing income invoices and paid accounts

• file all income invoices in date order
• write the cheque number and date on all paid accounts and file in cheque number order
• consider keeping a separate file for all Inland Revenue returns and statements (GST and PAYE).

Petty cash book

Petty cash is used to pay for small items for which it’s not always convenient to pay by cheque (e.g. stamps, milk, pens, or bus travel).

When setting up a petty cash book (see later sample) you’ll need:

• a petty cash tin or purse to keep the money in
• a petty cash book to record expenses.

Petty cash checklist

To start using your petty cash system:

• write out a cheque for cash, recording it on the cheque butt as 'petty cash'
• keep petty cash in a separate secure place
• make sure you receive a receipt for each petty cash purchase
• record the purchase, with the type of expense, in a petty cash book (see sample)
• keep a running reconciled balance
• when your petty cash gets low, write out a new cheque for cash for the amount that you have spent, to bring the petty cash back up to the original amount.

Other things to remember are:

• The first petty cash cheque is not an 'expense' – it cannot be claimed for income tax and GST – it is just to open the petty cash book. This would be coded to your petty cash asset in the statement of financial position.
• The reimbursements will be for the amount spent and therefore will be coded accordingly and any GST claimed.
• The petty cash book should be balanced at regular intervals. The balance in the petty cash will be the previous balance, plus any re-imbursements, minus the receipts as listed.
• Reimbursements from petty cash are subject to audit along with the organisation's other financial systems.
• Any cash received should be banked and not put into the petty cash.

Sample petty cash book

computerised accounting systems

As mentioned earlier, a computerised accounting system is the best option for most organisations.

Checklist for a computerised accounting system

There are many computerised accounting packages on the market and choosing the right one is important. Features that need to be considered are:

• can the system calculate GST and allow you to allocate GST by individual transactions?
• can it track funding or project spending?
• can you produce a full set of financial accounts (profit and loss and balance sheet)?
• are you able to process journal entries (adjustments other than banking)?
• is the system user friendly (you can usually get a free trial package before you buy)?

Chart of accounts

Once you have chosen your accounting package and installed it, you need to consider setting up your chart of accounts (see following sample). This is a list of all types of income, expenditure, assets, liabilities and equity.

It is important to spend some time considering who will be requiring information from you and what sort of information they will require. This will help you decide what level of detail is required in your chart of accounts. For example, a manager may need to know how much is spent on cell phones versus landline phones. Therefore you would have two categories for telephone in your chart of accounts. Whereas another organisation might not need that level of information and therefore only has one category for telephone.

Sample chart of accounts

Opening balances

If this is your first financial year you will have no opening balances to begin with. However if you are changing to a new accounting package you will need to enter your opening balances from the statement of financial position (balance sheet) from the last financial year (i.e. last year’s closing balances becomes this year’s opening balances).

Names file

Most accounting systems will require you set up a name or card file for each person or organisation you have transactions with. Some systems allow you to add in contact details and notes etc, which you may want to consider if this information is not recorded elsewhere.

Processing transactions

Most accounting systems work in the following two ways:

1. Processing your transactions direct from the bank statements as money in and money out.
2. Entering in invoices to be paid and then processing the payment against the outstanding invoice (and vice versa for income).

The first option is quicker as the transaction is only handled once. However the second option allows you to know how much money is outstanding and how much money is owed to you (creditors and debtors). You need to consider what is useful for your organisation compared to the extra administration time required.

GST processing

Most accounting systems will ask you to allocate GST on each transaction. Some account codes will have a default GST code set up. The code should still be checked before recording. It is also important to check the tax invoice at the time you are entering the information into the system to see if it is a proper GST invoice or not (see sample below).

Sample GST invoice

Example: Tax invoice for supplies worth more than $1,000

(From Inland Revenue's booklet GST guide: working with GST available electronically at www.ird.govt.nz).

bank reconciliation

It is important to reconcile your bank accounts at least monthly (see sample below). Most systems will have a separate function to reconcile the bank. Once this is completed, you can print off a bank reconciliation report that is kept with the bank statements.

Sample monthly bank reconciliation

Note: If the bank account and the cash book are in overdraft, the above instructions are changed as follows: ADD becomes DEDUCT and DEDUCT becomes ADD.

cash book accounting system

While a computer system makes financial recording and reporting easy, for small community groups a cash book accounting system is adequate.

A cash book is a spreadsheet, either in a multi-column book or on a computer (see sample on following page). It records all financial transactions, keeps you financially up-to-date, and allows you to keep control over your finances. The cash book keeps track of receipts and payments. It tells you:

• how much money has been paid into the bank
• where the money came from
• what cheques have been paid out, to whom and for what
• the total for the month or year for specific purposes e.g. rent
• the total for the month or year for all income and expenses
• your current bank balance.

Cash book checklist

To operate a cash book:

• use a cash book with as many columns as you think you will need – in a manual system, a 16-column book is best
• start each month on a new page (or spreadsheet)
• use the income and receipt columns that are most relevant to your organisation
• where possible, have separate columns for expenses that occur frequently
• make sure you write (or enter) the cheque number in the cash book – this makes it easier to reconcile with the bank statement
• if you are GST registered, set up separate columns for GST paid and received (manual cash books are more appropriate for smaller groups that are not GST registered)
• when you receive your bank statement, enter any automatic payments, bank fees or other items that appear on the bank statement
• add all the columns up at the end of the month and make sure the total of the 'income' columns equals 'receipts', and the total of the 'expenditure' columns equals 'payments'.

Sample cash book

This example is of a small community group (XYZ Community Group Inc) that is not registered for GST and has no paid staff. The group is using a manual cash book accounting system but the same methods can be applied to a computer spreadsheet.

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