Keeping accounting records
Imagine a large brown paper envelope labelled ‘March 2010’ stuffed full of receipts for all (or most) of the payments made that month. This is quite a common sight in NGOs that have not yet discovered the joys of keeping proper accounting records.
This section of the Guide will help you know why it is important to keep proper records and help you get started in how to do it.
There are also some more advanced pages aimed at accountants and auditors about Accounting Standards and Policies for NGOs.
Why keep proper accounting records?
- Keeping proper accounting records enables you to prepare reports that give managers important information about how the NGO is doing financially. You can then make informed decisions so that you can deliver a project within budget, avoid cash flow problems, and make future plans.
Accountability and Transparency
- If you clearly record all your receipts and payments, and file supporting evidence for every transaction, it means that other people can also have a look at what has happened. For example, other people within the NGO, donors, auditors and beneficiaries. If there is nothing to hide, make it plain to see!
- It is a legal requirement in every country in the world for registered entities to keep accounting records. If you are not registered as an NGO or a company, it is likely to be a requirement of your Head Office or donors.
How should we keep proper accounting records?
Accounting systems are based on two sets of records:
'Books of account'
where you write down details of all your financial transactions, including: the amount spent/received, the date it happened, a reference number, and a description of the transaction.
The simplest of all the 'books of account' is called a cashbook. One of the first steps in a new system is to start a cashbook and keep it up to date - by adding the details of every new transaction that happens.
A supporting document for every transaction
For example a receipt, invoice or signed authorisation form. This is evidence that the details recorded in the books of account are correct.
You should keep all the supporting documents in a neat file, writing a reference number on each one. The reference numbers help to match the filed documents to entries in the cashbook.
Book-keeping is the job of keeping all these 'books of account' up to date. You can keep records manually in physical books, or on computer using Excel spreadsheets or Accounting software packages.
Introduction to Basic Book-keeping - A word document with accompanying Excel spreadsheet that takes you through step by step how to keep a simple cashbook and prepare a summary report of receipts and payments.
Mango's Accounting Pack - Simple but flexible Excel based cashbook and linked reports, comprehensive user guide, standard forms and registers. Designed for a field based office.
Mango's Course Handbook - has a whole chapter on keeping accounts.