Wouldn’t you prefer spending time with club members and enjoying activities versus allowing bookkeeping to fill your hours? Maintaining financial records for clubs and associations is different from accounting for big companies yet the need remains. Clubs and associations don’t have the immediate in-house resources so it’s best to place the books in the experienced hands of a bookkeeper.
The camaraderie and activities are sure to continue with the help of efficient accounting. Otherwise, sloppy books and a cavalier attitude toward collecting dues and other income could result in financial ruin for a club or association.
Particular accounting needs of clubs and associations, like those of nonprofits, differ from other types of businesses. Mainly, clubs, associations, and nonprofits have to keep track of fund accounting. Different rules and regulations apply according to how funds are received, and in some cases, the wishes of the donor dictate how money is used. Furthermore, in the state of Connecticut, clubs and associations are specifically responsible for dues tax.
Some clubs and organizations rely on members for dues as well as favors — such as helping with accounting. However, as illustrated below, that is one of the major problems that necessitates the assistance of bookkeeping services. A volunteer may lack the expertise as well as the time and effort to accurately track and maintain financial records.
Therefore, you’ll learn below how a bookkeeper offers help to clubs and associations, how fund accounting is essential, and more on Connecticut laws regarding dues tax. Knowing about simple bookkeeping for a club or association is within reach!
Accountants and bookkeepers can be strictly associated with money and profits. However, increasing profits is not an accurate description of the role of a bookkeeper in regards to nonprofits, government agencies, clubs, institutions, etc.
Those receiving money through private or public means use fund accounting versus a more traditional format. Fund accounting seeks to manage and allocate money acquired from donations, grants, private donors, etc.
Many times, regulations demand funds be used for particular purposes alone. Bookkeepers keep an eye on restrictions to ensure money is placed in proper accounts and used for the prearranged purposes.
Types of Clubs and Organizations Using Fund Accounting
A range of clubs and organizations utilize fund accounting:
- Public/Private Universities
- Churches/Places of Worship
- Government Agencies
- Private Trusts
- Nursing Homes
- Art/Civic Foundations
- Shared Interest Clubs (yacht, gun, hunt)
Fund Accounting Categories
As mentioned, clubs and associations are often met with the responsibility of distinguishing between different accounts, allocating funds, and tracking data. Associations may have volunteers helping with accounting. However, this becomes an issue as volunteers may lack the knowledge, experience, and motivation to keep a keen eye on the accounting process. Each fund has its own purpose as how money is to be used.
Current unrestricted funds are used for general expenses. An organization’s board can use the money how they see fit as long as the use supports the organization’s founding mission.
Board designated funds originate from current unrestricted funds. The board designates a sole purpose for this fund and subsequent deposits. The board (not the donor) decides what to do with the funds.
Current restricted funds honor the donor’s wishes as to how the money will be implemented. For example, a golf course receiving funds to improve its greens cannot use the money to improve interior facilities. The money must be used as designated by the donor.
Endowment funds hold assets that earn additional money. Clubs and associations can use the additional money yet the principal must remain untouched.
Fixed asset funds are used to pay for assets such as land, buildings, and equipment. This fund helps the board maintain a stable picture of what it costs to stay afloat without needing to use unrestricted funds.
Specialized fund groupings stem from a unique situation. For example, a university may want to reward students with scholarships based on current events (civil movement, tragic events, etc.). Then, specialized funds can be established as long as the money is served for the predestined purpose.
What Are the Duties of Club Treasurer?
A club treasurer acts as the closest thing the organization has to an in-house bookkeeper or accountant. The next section covers why it’s a better idea to let a seasoned professional handle most of the accounting. However, the basic essential functions of a club treasurer are as follows:
- Recording daily transactions
- Reporting on finances at club meetings
- Ensuring year-end filing is complete
- Collecting membership fees
- Paying bills
- Meeting financial deadlines
A treasurer’s report informs club members on the financial status of the organization. It’s best practice to be as transparent as possible as to how funds are used so members feel comfortable about dues. A good treasurer’s report unveils a club’s current cash balance for all accounts, outstanding expenses, and future financial plans.
Collect and Distribute Club and Association Funds
A club treasurer will collect and distribute expenses. Collecting (income) comes from membership dues, fundraisers, etc. Expenses (distribution) can be anything from paying yearly state tax to supplying food at an event. Payments are made by cash, check (written off of a club bank account), or credit cards (connected to club bank accounts).
It’s best to establish bank accounts for the club versus mixing and mingling personal expenses, which can make bookkeeping complicated. Regardless of size, it’s best practice to establish a club bank account for the protection of the club, its members, and the treasurer. Be sure all collections and distributions are recorded.
It’s important to be very specific when recording club income and expenses. Each action needs to be cataloged specifically for optimal budgeting. For example, if you have an event each Friday, the expense sheet needs to be micromanaged, outlining categories (food and drink) and every item purchased (sandwich tray – $100.00). Depending on the nature of a club and subsequent events, bookkeeping gets meticulous and possibly complicated. The job of a treasurer becomes a lot easier with the assistance of a bookkeeper and financial software.
How to Make Accounting Easy – Add a Bookkeeper
As you can imagine from reading about the separate fund accounts above, it can get confusing for a layperson or volunteer, despite their good intentions of helping the club or association succeed. Clubs and associations need to designate a treasurer, and a volunteer, even one who is a CPA, may not put in the time and effort required. In worst-case scenarios, good intentions facilitate the closing of clubs and associations who no longer have the financial health to continue.
Moreover, it’s likely treasurers want to enjoy their relationship with the association and members rather than attend to mundane accounting tasks. Invoicing, billing, collecting, and accounts receivable tasks are better left to a bookkeeper.
Bookkeepers earmark money received and keep track of fund accounting. Working with a bookkeeper does not vary much across clubs and associations, yet money needs to be properly allocated for proper use. Without an organized flow and tracking of money, a club or association can quickly find itself in financial trouble. Let a bookkeeper do your accounting so you can keep focus on what you do best – run your organization.
Another major issue is trying to survive on member dues. If you don’t have enough members then you either have to raise dues or cut into your expense accounts. Clubs don’t want to raise dues on members yet club owners struggle with finances. A bookkeeper lends the objective insight needed to read the numbers and relay that reality to an owner. A bookkeeper can help formulate a plan with the best outcome in mind for the club, the board, and its members.
How proficient are you at using QuickBooks or other accounting software? The software’s potential is unlocked by the experience of the user. It’s recommended to allow a bookkeeper to attend to your accounting, but if you want to do it in-house, a knowledgeable source can train your team in using QuickBooks or consult you regarding which accounting software to purchase.
In some cases, clubs and associations do their accounting as an add-on feature to industry-specific software. However, non-profit software can be extremely expensive and the accounting capabilities may be minimal as compared to a specialized financial program like QuickBooks. In some cases, a bookkeeper can save you money by informing you of alternatives.
Lastly, associations with a lot of board members need to share records. Using QuickBooks online, or similar software with such share and accessibility options, is recommended. Don’t maintain records on a home personal computer. Rather, keep financial records secure in the cloud or on an in-house computer with its own dedicated servers. Also,the QuickBooks app makes it easy to streamline your accounting.
Connecticut Dues Tax
Connecticut dues tax is a 10% tax placed on dues or initiation fees and is different from sales tax. This is applied to social, athletic, or sporting club. The tax is imposed on the club or association which then gets reimbursement from the tax from members.
Dues include any charges members pay for privileges or facility use that lasts longer than six days. Fees include payment, contribution, loan acquired as a condition of membership, share of stock that signifies membership, etc.
As recognized by the state of Connecticut, a “club” is any organization owned or operated by its members. An organization operated by members is one that relinquishes full control to its members. Control entails deciding who is accepted as new members along with establishing membership rates.
What Clubs or Associations Are Exempt From CT Dues Tax?
- Clubs that charge $100 or less for members to enjoy full privileges and covering any initiation fees
- Clubs sponsored by charity, religion, government, or nonprofit educational institution
- Any society, order, or association operating under the “lodge system” or local fraternal organizations operated out of a university or college. A lodge system assumes carrying-out orders of a local parent organization yet operating as independent chapters, lodges, or organizations.
- Professional organizations
- Lawn bowling clubs
We can offer your club or organization something different at MISSION. Allow us, a team with rich experience and an expansive financial background, attend to your accounting needs. Why be inconvenienced with the books when you could be enjoying the ocean or another Connecticut pastime? Book an appointment for a consultation to get started!