Checking Our Organizational Posture: Is Our Bookkeeping Up To Par?

Every so often, it's important to update our organizational perspectives and practices. If we don't take time to assess our own internal activities, we may begin to take certain actions for granted and fail to consider that a better way may yield better results. That's why we get excited when new resources are brought to our attention. Resources that get us to stop and think about how our organization deals with various issues and whether any improvements can be made. After all, organizations are dynamic and change over time, and must adapt to changing environments and best practices.

“The Do's and Dont's of Bookkeeping for Small CBOs and NGOs” is a concise guide produced at the Moses Sihlangu Health Care Center in Kabokweni, South Africa. We mentioned it in one of our NewsFlashes last year, which you can find here.

 "This booklet has been produced with one goal in mind, namely, to enable small projects, CBOs and NGOs to cope with the 'burden' of having to keep their financial books in a way that will be acceptable to their funders. Too often, people get enthused with their project and forget one important aspect, that of having a well-kept and transparent financial system." -- Michel Barrette, author of the Dos and Dont's of Bookkeeping

The guide was intended to be used in a workshop context, although it may also be read by individuals interested in financial systems. Because the guide was developed in South Africa, it concentrates on local legislature and environment, although the accounting principles are universal and can be adapted.

In fact, this guide has a wide potential audience. Rather than focus on theory, the subsections of the guide provide hands-on information and advice for organizations of any size; from smaller groups to larger, more established entities. The guide can be helpful to agencies with computerized accounts or those using more traditional bookkeeping practices. The material is simplified so that a novice could apply it rather quickly.

While the whole guide is an excellent resource, here are seven topics we pulled out to help community organizations thinking about their bookkeeping needs.

1. Keep a Paper Trail

All money received by the organization should be recorded in the form of a receipt. The receipt should always include: The name of the organization receiving funds, date money was received, name of donor, purpose of the donation, and person receiving the funds (this individual should sign the receipt). This record should be entered in its entirety before any money is deposited or used in any way.

2. Records of Receipts

One practical way to keep your paperwork organized is to set up an analysis book. One entire page of this record keeping book is dedicated to income (receipts). In practice, columns may indicate the type or source of money received (donors, sales, grants, interest, etc.) along with the date and other details of the particular money received.

All receipts should be numbered. And this becomes a cumulative report of all receipts in numeric chronology. Therefore, even if a receipt gets canceled, it must still be entered as “nil.” Original copies of all receipts, even canceled ones, are also kept in the analysis book.

For proper security, all money should be adequately protected by storing it in a locked safe or lockable container. It's good to take one additional step to protect your money, always deposit money on different days rather than consistently making bank runs on the same day.

In light of fraudulent concerns, checks should also be written clearly and carefully to minimize any opportunities of tampering.

Also, when possible, an organization should use bank checks for all transactions made. To ensure accountability and internal control of finances, it is recommended that two individuals sign all checks written. And these checks ideally would not be signed by either the bookkeeper or the organizational supervisor (although in smaller organizations this may be unavoidable).

3. Requisition Form

It is increasingly important to ensure that all money transactions are authorized. A check or cash requisition form is recommended for all payments. Basically, this documentation process formally requests money in the form of a check or cash, and leaves a paper trail recording the transaction's purpose.

When requesting a payment, three steps are involved: 1) The bookkeeper prepares the requisition form requesting the transfer of money, then 2) the supervisor approves the payment, and 3) signatures formally authorize the transaction.

Each requisition form gets filed, in order, along with any supporting documentation. For example, staple account statements or cover letters to the form to keep on record.

4. Analysis Book

The analysis book should also record all payments made. Transactions are listed in order (by check number or transaction number) and dated. Other important information to note is the ultimate purpose or destination of the funds. Is this money going towards salaries? Rent? Phone? Postage? Equipment? Travel? These are some examples of column headings for the worksheet. And again, each row designates a new payment.

Similar to the receipts page of this book, the payments page needs to show each check or transaction number in order for effective record keeping. This means that a canceled check gets written in as “nil” so that it does not affect the sequence of numbers. And the actual checks get stored on file rather than being shredded or thrown away.

5. Travel Log Book

Although it may be difficult to provide receipts and records of all money spent during travel, it is important that staff try to do so as much as possible. Any staff member who travels frequently should also be encouraged to report details of their trip in a log book.

For each trip taken, the traveler should record: Dates of arrival and return, purpose of trip, individuals visited, type of transportation used (and number of kilometers traveled if by personal car), organizational member authorizing the trip as well as their signature, costs of the trip, the name of the individual that refunded the costs, and the date of the refund.

If a staff member travels often, he/she should be refunded for travel expenses on a weekly or even monthly basis, rather than being reimbursed after every trip.

Under no circumstances should any money be refunded to any traveling staff member that does not have a record of the authorization of the trip.

6. Salary Vouchers

Every dollar that gets paid to staff in wages must be properly recorded. It is recommended that salary vouchers be used, regardless of whether employees are paid daily, weekly, or monthly. One copy of the voucher is given to the payee and another copy is attached to the requisition form. Some organizations prefer to keep a separate record of salaries paid, and will therefore require a third copy of the voucher for this purpose.

 Salary vouchers should always include: The organization's identifying information (name, address, phone number), the gross salary wage, deductions for pensions or retirement, the taxable salary, and other deductions applicable (medical, etc.), and the net salary to be paid to the payee.

 Organizations operating with cash rather than check transactions should maintain written records of all salaries paid by requiring employees to sign for their wages. This will allow the organization to keep similar records of money paid and received to be able to prove, when needed, that salaries have been paid.

 7. Other Bookkeeping 101 Considerations

This detailed resource outlining the do's and dont's of bookkeeping goes into great detail about balancing the analysis book that you have so painstakingly kept. Every transaction is recorded, including money received and money spent. A comprehensive record of your organization's finances allows you to balance the books on a monthly basis to ensure that your organization is up-to-date on its spending. The organization needs to know what's left in its account for future endeavors, planning, and monthly upkeep. These numbers also dictate the extent to which the organization needs to seek out more funds.

For a thorough reading of how to handle balances, bank statements, petty cash, summarizing accounts, and budgeting and capital expenditures, please refer to this helpful guide that features instructions and visual examples.

Anyone can pick up this resource and make sense of it; particularly beginners. The authors of the guide even included a glossary of terms in the back, to help novices or non-English speaking individuals trying to access the resource globally.

A list of helpful tips for bookkeepers and a list of tips for supervisors follow. These tips are suggestions regarding everything from petty cash to cash advances to bank charges. The guide attempts to be as comprehensive as possible, covering all the facets of financial organization.

The resource is meant to be accessible to all; because more accurate bookkeeping means more effective transactions and a better sense of the resources available to an organization to maximize its potency in communities.