Tax Calc for charities

[eteb3]

Our small unincorporated association will soon be registered with the charity commission

Seems a good time to move away from Excel

Looking at Tax Calc as they have a charities module.

Any comments on how easy for a novice volunteer treasurer to get their head round it?

Thanks

 

[Lisa Thomas]

Does the charity have an accountant, or is that you?

 

[eteb3]

That's me!

 

[eteb3]

I’m not an accountant, to be clear. I’m the volunteer treasurer

 

[numbersrule]

I am not familiar with the Charity Commissions expectations with regard to software but my understanding would be that TaxCalc may not help you with bookkeeping.

As you are using Excel is that for the bookkeeping?

TaxCalc includes an Accounts Production module for Annual Accounts along with modules for Tax reporting. There are also AML and eSign etc modules.

But TaxCalc is not bookkeeping software like Xero or QuickBooks.

Irrespective of whether the new Charity status will introduce the need for an Auditor (?is that the case ?) then maybe bookkeeping software like Xero or QuickBooks would enable remote User Access for other Officers if they need to see the detail of the bookkeeping.

Then you could use TaxCalc for the Accounts Production and Tax Reporting.

The Tax and Accounts module in Xero is not accessible unless you are an Accountant with Xero Partner Status.

 

[eteb3]

Thanks.

Yes, we use Excel for book-keeping. The annual accounts have to be manually produced for a CC16a (download link) with no end of scope for error. By now I've got the Excel knocked into shape so the precedent information has been recorded through the year, but it's still a big headache.

There's no need for audit unless the charity is truly enormous (and audit thresholds have just been raised higher still, which I think is a mistake, but there we are)

Xero is silly money for the size of our charity. I'll have a look at QuickBooks. One major limitation of most software is that it's unable to do 'funds accounting' (we have to account for funds held under different trusts separately).

Disregarding the funds problem, is any of the free software bundled with bank accounts any good for bookkeeping? eg, we have "Business Finance Assistant" with LLoyds?

 

[numbersrule]

Accounting for Non-profits

Charities, clubs & social societies can be run as non-profit businesses. Read this guide to learn about non-profit accounting for tax-exempt companies.

www.xero.com

Have a look at the above link.

Xero's Ignite package is £16 + VAT per month if it fits in terms of transaction volumes. Is that too much?

 

[eteb3]

Thanks, that's helpful. At that rate it would be 4% of our annual income, which feels hard to justify.

In case we decide otherwise, the page doesn't actually tell me that Xero can cope with funds accounting. do you know?

 

[Scalloway]

I use Xero for one charity I am treasuer of. I just use the chart of accounts to record income and expenditure for each fund.

 

[numbersrule]

What Is Fund Accounting?

Learn about the basics of fund accounting and the different types of funds. Discover the characteristics and the pros and cons of fund accounting.

www.xero.com

Does the above link help?

 

[eteb3]

Does the above link help?

A bit, thanks , but not loads, because it’s so hand-wavy. Great that Xero is the best product ever ever ever, but how does it do fund accounting in practice?

(I’m only answering your question factually; please don’t infer ingratitude!)

That link let me find this one, though, which is much more like the manual I need

Xero for Small Charities

Hands-on guide for Xero accounting software

xero4charities.co.uk

Another basic question: if I use the chart of accounts like @Scalloway says, I assume I can run sub accounts? So Bank is divided into as many funds as we have? Or maybe each fund account floats free of any particular “real” account (Bank, PayPal, cash tin, etc) and they do their things independently?

 

[Scalloway]

I leave the bank as it is. How I do it is the have ledger accounts setup thus:

Project 1 Income
Project 2 Income

Project 1 Expenses
Project 2 Expenses

And so on.

In the charities I am treasurer of the budget holders look after the actual funds. I just seem to be the scorekeeper who sorts it out for the year end.

 

[Daybooks]

If you are currently using CC16A from the Charity Commission to produce your final account in that format then it implies you are producing a Receipts and Payments Account with a Statement of Assets and Liabilities.


This is important because if your charity remains eligible to use this method, which is not a double entry method, then using a commercial double entry accounting system for this purpose will present you with other challenges. The system needs to be able to correctly report on the cash entries only, which is a challenge to some of them. My local community association use an online system for their receipts and payments account and even their ‘cash basis’ report is inaccurate. It does explain why it is a ‘beta’ report and has been for many years.

Additionally if you were to produce accruals accounts rather than the Receipts and Payments Account then those accounts must comply with the Statement of Recommended Practice (SORP) for Charities. A different kettle of fish altogether.

Happy to be corrected but TaxCalc is not going to solve your dilemma. Its primary function is for compliance with accruals accounting and thus your are not going to get a receipts and payments account with statement of assets and liability from it. Nor are you going to be able to file any accounts prepared by it directly with the Charity Commission, as there is currently no facility on offer by the Commission.

To do your fund accounting you are going to need some dimension within your chart of accounts to do so. If you have a separate project or organisation code then that would enable you report properly otherwise you are going to have to build your hierarchy into the nominal code in some way or another.

I use a standard Microsoft Excel solution - one for Receipts and Payments and one for accruals accounting across my clients. It gives full fund accounting, including for accruals accounts their own balanced trial balance. The accruals accounts are then uploaded to my Accounts Production software whereas the Receipts and Payments is simply passed to another Excel spreadsheet which effortlessly produces the Receipts and Payments Account along with the Statement of Assets and Liabilities in the desired format. They are then merged into a Word document for the annual accounts that can be filed as PDF’s with the Charity Commission. There is no headache.

Please do not disregard your fund accounting requirement for a moment; it is your primary consideration and your solution needs to meet this. If £16 plus VAT represent 4% of your annual income I would not be looking to do accruals accounting or using anything other than Excel anytime soon. Am sure there are lots on here who will disagree and happily take your money.

You are right to express concern over the new thresholds. In particular raising the independent examiner threshold for being professional qualified is probably going to result in more non compliant accounts. You will often find a set of accounts with a Receipts and Payments Account accompanied by a Balance Sheet. It is not hard to understand why but no excuse.

Good luck and think carefully.

 

[eteb3]

Super helpful @Daybooks

On the basis of your comments it may be my effort would be best spent making the Excel workbook intelligible to my successor. That shouldn’t be as hard as it is (interesting that the xero4charities site reckons this author-author-dependency is a very common problem)

 

[Daybooks]

Super helpful @Daybooks

On the basis of your comments it may be my effort would be best spent making the Excel workbook intelligible to my successor. That shouldn’t be as hard as it is (interesting that the xero4charities site reckons this author-author-dependency is a very common problem)

Spreadsheets are only dependent upon their authors when they are badly written and/or require continual updates. Best to avoid if you can.

This usually comes about when you try and make a spreadsheet specific for a purpose, losing sight of the objective. A Receipts and Payments Account is a simple analysis of the bank account(s). A double entry accounting system is a method of recording transactions to uphold its dual aspect concept (one being the assets of the business and the other the claims against them; in other words Assets = Capital + Liabilities).

The two methods are entirely different but neither of them vary because of the type of business intending to use them. Each business follows the principles of the single entry Receipts and Payments or the principles of the double entry method.

A charity might have several bank accounts including a petty cash float. Each of them should have their own ‘cashbook’ then consolidate when needed. By way of example one spreadsheet with say three cashbooks becomes business specific whereas three separate spreadsheets each uniquely the same which then gets fed into a fourth consolidation spreadsheet maintains clarity and useability. A fourth ‘cashbook’ uses the same template as the other three and gets consolidated by its mere presence!

Excel – the gift that keeps on giving!

 

[numbersrule]

A bit, thanks , but not loads, because it’s so hand-wavy. Great that Xero is the best product ever ever ever, but how does it do fund accounting in practice?

(I’m only answering your question factually; please don’t infer ingratitude!)

That link let me find this one, though, which is much more like the manual I need

Xero for Small Charities

Hands-on guide for Xero accounting software

xero4charities.co.uk

Another basic question: if I use the chart of accounts like @Scalloway says, I assume I can run sub accounts? So Bank is divided into as many funds as we have? Or maybe each fund account floats free of any particular “real” account (Bank, PayPal, cash tin, etc) and they do their things independently?

That's OK.

My understanding is that Xero's Tracking Categories can enable for example Restricted Funds to be segrgated from Unrestricted Funds.

IMHO Scalloway's Method is not making the best use of the full power of Xero.

I would suggest you could sign up for a Free Trial and delve into the detail that way at no cost.

 

[eteb3]

A Receipts and Payments Account is a simple analysis of the bank account(s)

Yes. Things get trickier when a single bank entry needs to be split between multiple funds. Currently I have a category “ignore this transaction”. I transpose it to another sheet where I do the splitting. I borrow double entry principles (I think…) to check that total ignored transactions = total on split transactions sheet

Your point about bespoke workbooks is well taken. A collection of manually consolidated sheets should work fine, and won’t break

PS one other headache is donations arriving in Bank net of transaction fees, e.g. from Just Giving type sites

 

[Scalloway]

IMHO Scalloway's Method is not making the best use of the full power of Xero.

My bookkeeping skills were honed in the days of Sage. I really should look into more of Xero's features.

 

[Daybooks]

Yes. Things get trickier when a single bank entry needs to be split between multiple funds. Currently I have a category “ignore this transaction”. I transpose it to another sheet where I do the splitting. I borrow double entry principles (I think…) to check that total ignored transactions = total on split transactions sheet

Your point about bespoke workbooks is well taken. A collection of manually consolidated sheets should work fine, and won’t break

PS one other headache is donations arriving in Bank net of transaction fees, e.g. from Just Giving type sites

Keep things super simple. You probably want a standard chart of accounts structure encompassing a nominal name, project code and possibly another, say, organisation code for flexibility. Each has their own table which is used as to populate a drop-down list when entering transactions.

The project table contains the fund code if desired. This means you can record by projects within a fund simply through the project code.

Your cashbook is just your prime entry recording book.
When a bank entry spans multiple projects simply use as many individual lines as there are projects needed - on your cashbook. You have a ‘bank rec’ column on same cashbook whereby you reconcile it back to the Bank Statement.

Fees reduced from incoming receipts get handled in the same way. Simply create extra lines - meaning you have the gross income analysed by project and fees analysed to whatever project resolution you desire.

The heavy lifting of reporting is done on your consolidation workbook.
One solution; many uses.