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Posted on November 02, 2013
( 6 minute read )

If they use software for their accounts, many voluntary organisations will start off with a spreadsheet. These are perfectly adequate for many small organisations; my sister in law manages their church accounts entirely in a spreadsheet.

But if they look for an accounting program, they will find that many are inflexible and restrictive. For example, most restrict you to two or three levels of breakdown; so, if you have general funds, designated funds and restricted funds, you can only break these funds down to one or two levels, preventing detailed analysis of income and expenditure. Many lock you in, preventing you from moving to another program if you outgrow your current one. Because charities have to keep their accounts for inspection for at least six years and companies for ten, they can find they have to keep an old program which otherwise they no longer need just to comply with their legal requirements.

Many programs still use account codes rather than human readable names because they were originally written when computer memory was in short supply and this was one way of saving on memory.

If an organisation has grown out of spreadsheets or their current program and does not need an enterprise package like SAGE or openERP, the best program is GnuCash, a free program that uses double entry accounting like any professional package and which can handle invoices and employee payments as well as normal income and expenditure.

GnuCash can import data in a number of formats and also from spreadsheets though this may involve changing the layout of the spreadsheet before the data can be imported from it. How useful these options may be will depend on what program the organisation has been using in the past and how easy it will be to compare the reports generated in previous years with the reports generated by GnuCash.

When you first run GnuCash, it offers to create a set of nominal accounts for your payments and receipts and it is worth choosing the small business option because, though you may need to change quite a lot of the headings that it suggests, it gives you an idea of the structure of the program.

Under the Assets account, you should have a Current Assets account; this is where you should add all your day-to-day bank, building society or petty cash accounts; give them meaningful names so that you, or someone else, doesn’t confuse them later on. If you haven’t been able to import your data from another program, put the opening balances in the last day of the previous financial year; otherwise the opening balance will appear as income in the current financial year.

Investments go under the Equity Account and Loans under the Liabilities Account. The Payments and Receipts Accounts allow you to enter the income and expenditure categories (nominal accounts) that you need to keep track of your income and expenditure. This is where you may need to do most work to customise the program to meet your needs. For example, if you have general and restricted funds, you need to add these first and then the separate headings for income and expenditure within these separate funds (designated funds are normally part of general funds and so come at the second level). You can break the different funds down as much as you like but remember that this means you get longer and longer names in some of the reports you later generate. So don’t go mad with this new-found freedom.

If you have been using account codes in your previous program, you can add these here but they may have an unexpected effect. GnuCash sorts the human readable income and expenditure categories alphabetically; if you add account codes, GnuCash uses these to sort the headings instead.

If you have regular income and expenditure like standing order donations or rental payments, you can add these as scheduled transactions, saving time on routine entries. You can store names and addresses of customers and suppliers in order, for example, to generate invoices and payments.

You have a very wide choice of reports, most of which may not be relevant to you. So it is worth taking some time to note which ones are going to be most helpful; for an independent examiner, the Assets and Liabilities>General Ledger report provides the necessary information. You will need to generate a separate report for each of your Assets and Liabilities accounts. If you use an accountant, consult them about their requirements or send them the file; it will cost them nothing to install GnuCash to read your file.

By default, GnuCash prints the report for the current year; to get reports on the last three months or on a previous year, go to Edit>Preferences>Accounting Period, select Absolute for the start date and click the down arrow tab to open a calendar on which you can select the appropriate start date; do the same for the end date.

GnuCash is available from their download page.