Collaborate on Net 30 Invoice Template for Non-profit Organizations with Ease Using airSlate SignNow

Net 30 invoice template for non-profit organizations

Welcome again everybody thank you for showing up here today my name is Alex and I'm the head of support for Aplos and we are the company that's hosting this webinar as you know and what we're going to be going over today are fund accounting basics for nonprofits and if you're a church and you're in here this will apply to you as well but the terminology that I use will be a little more non-profit specific so just keep that in mind but the the whole of the content will be applicable to just about anybody that has use of fund accounting and what we're going to be going over today again is kind of the fund accounting basics but we're going to answer three main questions about your accounting today the first is going to be what is accounting we're gonna take a very basic look at what accounting is and how you can begin to understand it and use it for your organization next we're going to take a look at what is fund accounting so how does accounting work but then how does that kind of change or how is it different for nonprofits in churches specifically with fund accounting and then lastly we're going to take a look at the question of how do I keep track of my organization's finances okay so there's going to be the three questions for today so let's take a look at the first one what is accounting well in short accounting is keeping track of your stuff and really that's kind of an overarching general description but really it boils down into five different areas that you're going to track and these are the five areas of accounting and this is the money that you own so your possessions money that you owe so your debt or payables to anybody else the ways that you get money otherwise known as your income the ways that you spend money or your expenses your bills and then it all kind of boils down to your overall worth and so using these five areas of accounting you can begin to keep track of things for your organization and in accounting these five different areas have some unique names here so the money that you own is referred to as your assets or assets the money that you owe so again your debt is called your liability okay the ways you get money is called your income the ways that you spend money is called your expense and then your overall worth is known as your equity so let's take a look at an example real quick so let's say we're gonna use an example of personal finance here so let's say that at the beginning of the day you have $10,000 in your bank account which first of all congratulations that's great but you have $10,000 in your possession right now and that is money that you own okay it's yours you possess that money so therefore it's an asset you can see right underneath the little house there there's my beginning balance of 10,000 and that's my asset so then I go to work and I get a paycheck and let's say I earn $1,000 worth of income and so that is money that I am receiving so therefore that's the other another area of accounting right there is the ways that I get money right so there's income for $1000 so with that thousand dollars of income my new balance of my personal asset the money that I own is $11,000 okay so next moving down you have expenses so let's say I go I pay my my car payment and my pizza and keep the lights on all of my bills for the month and those come out to about $800 worth of money that I am spending otherwise known in accounting as your expenses okay so I had the eleven thousand dollars after my income I spent eight hundred so at the end of this example at the end of the day I now have ten thousand two hundred dollars as my new balance of my asset so again going back I had ten I made a thousand which brought me to eleven I've spent eight hundred so now I have ten thousand two hundred dollars in assets and so this is a an everyday thing that you're gonna go through so you have money you spend money you make money I mean that really is accounting right there so those are only three areas of accounting the assets income and expense so how does this play into your liabilities and your equity well let's take the other half of a example and say that that ten thousand two hundred dollars that I have again is money that I own it's mine right but is that really what I'm worth is that how much money that kind of you know overall how much worth I have as an individual well let's say that I have $5,000 worth of a student loan outstanding so this would be considered my liability its debt its money that I owe somebody else okay and this actually counts against the money that I have so I may have ten thousand two hundred dollars in the bank but I owe five and at to somebody else so really at the end of the day what I'm truly worth is five thousand two hundred dollars which is what I call my equity okay so this example altogether takes it looks like this so again ten thousand dollars that I had I made a thousand of income so now got eleven I spent eight hundred so at the end of the day I've got ten thousand two hundred dollars now I have ten thousand two hundred dollars but I also owe five thousand so my overall worth there my equity is five thousand two hundred dollars okay now again you use this on a daily basis so you track the money that you make from your jobs the money that you spend on your bills and then how much you have left over at how much you owe so accounting is again just keeping track of your stuff it's keeping track of how much you make how much you spend what you owe how much you have and then what do you kind of boil down to of your overall worth so what is a what is sorry let me here oops what's that guy a little technical difficulty here okay so let's take a look at the second question here what is fund accounting so accounting again is keeping track of your stuff and then fund accounting is actually a different category it's a further detail the process of accounting that churches and nonprofits use that focuses on accountability rather than profitability excuse me so any organization whether it's a business or a non-profit you want to know whether or not you're profitable whether or not you're making money but the the purpose of fund accounting is not this to not only track profitability but this concept of being accountable so with a church and a non-profit you have need most often to keep track of designated designated areas within your organization so to use the example of a church right so if a church has general fund where all of your kind of tie then all your money comes in and that's kind of your your your main source of income there that goes into your kind of general purpose where you pay the bills and you pay your employees and keep the lights on that's kind of your general fund but then let's also say that you have a missions fund and a building fund so that's two other areas within your organization that you were kind of stashing money away or aside for for whatever designated purpose now each one of those funds is going to have its own balance its own income its own expense even its own debt and overall equity so it's like almost keeping track of a little mini organizations within your larger hole so to use another example of like personal finance so personally you have a bank account and you have bills of your income like the example we took a look at but if you want to stash away money to go on a vacation then that would be the concept of a fund so that's money that you get and then out of my money I'm kind of portioning out a certain amount towards this different purpose which would be a fund that you want to keep track of so again here's an illustration so you have your money and then you distribute that money to different things so here's the money I have set aside for my building for our missions for my operations different things so here's an example that we can take a look at here so let's say that you have three thousand dollars in your checking account as a nonprofit ok this is money that again you have received through donations and just gained through revenue maybe and then you spend to keep the lights on and then you apply for a grant and this grant gives you five thousand more dollars but this this grant has a unique purpose to it so it has to be spent in a very specific way so when you receive this check for $5,000 and you go to the bank and deposit it your checking account all of a sudden goes up to $8,000 but you know and that only five of it is really only five of it is kind of set aside from everything else to be used for that grants purposes okay so that's where this fund accounting comes into play so fund accounting would allow you to take a look at your checking account and see not only do I have eight thousand dollars but three this for me and five of it this for this fund that I need to keep track of separately okay so when I coach people on how do you figure out what a fund is for your organization so do I keep track of you know a fund for my Amazon account or do I keep track of a fund for you know a different campus or something really if you need to answer this question here do I need to know how much money I have set aside for blank the answer that blank most often than not is going to be a fund that you want to create so again a fund has its own balance it's got its own income its own expense its own ongoing worth you know so if you can answer that question write those down and the answer again to that blank is probably going to be the name of a fund that you want to create in your fund accounting system so the third question here how do I keep track of my organization's finances so as a kind of a quick recap we talked about accounting and accounting is keeping track of your stuff right the money that you own o receive spend and your overall worth fund accounting snaps another piece onto that so it's still accounting but it's accounting for each kind of division or fund within your organization so to track this to keep track of those ongoing balances and the money you're receiving and spending and all that kind of stuff you want to have what's called an accounting system in place and an accounting system most commonly these days is a software but it's really a software or a process put in place to keep track of those five areas of accounting which again are your assets or the money that you own your liabilities the money that you owe income is the way that you get money expenses is the way that you spend the money and then your equity being your overall worth so a software or a system that tracks all of this and an accounting system has three primary aspects to it or three basic functions the first is to set up accounts and we're going to take a look at each one of these here in just a second but at a high level the accounts that you set up are like line item categories to represent those five different areas okay we're gonna take a look at that here in a second so you set up your accounts and once you have your account set up or created you can use them when recording transactions and a transaction is a movement of money somehow through your accounting system so either getting money spending money transferring money paying bills receiving invoices all that kind of stuff are all examples of transactions that you would enter and then lastly once you have your accounts created and your transactions entered you can pull a report or series of reports to basically answer questions like how much money do I have how much money have I made how much money do I have set aside for my funds reporting is kind of what everything boils down to in an accounting system so let's take a look at accounts here first so accounts again is the first aspect in any accounting system and that's to create a line item or a category for each of the five different areas of your accounting system so those five areas assets liabilities equity income and expense and each category or each type of account has its own kind of thousands range that the account numbers are typically created in so for assets they're typically created in the 1000 liabilities are two thousands equities three thousands income four thousand and expenses are five thousands and above now the reason for this is really to just keep everything kind of consistent and aboveboard so when you go to any organization really and take a look at their financial statements they will most likely have a very similarly kind of looking chart of accounts with these thousands ranges so it's a lot easier to stay consistent with with other organizations this way so let's take a look at assets first so assets again are numbered in the 1000 range in any account that you set up is going to have a number and a name so here's my assets so again assets are money that you own or possessions that you have as an individual we're going to or an organization whatever you're accounting for so you would give the account a number like 1000 and then you would have a little dash or a colon or something and then have a name that is descriptive of what the account is representing so for instance the money in my checking account okay that's asset that's money that I have so I'm going to create an account to track that then I'm going to call it 1000 - checking okay same thing with my savings accounts 1,001 - savings so going forward these accounts would be used to represent those balances in my bank accounts other types of assets that you can have is a invoices receivable or accounts receivable which is money that is owed to you but you just haven't received yet you can also have possessions like inventory or fixed assets as well as a land or buildings so for any possession that you as an organization own and need to report you would create an asset account for that like so okay the next is liabilities and liabilities again is any money that you owe or debt and those are going to be numbered in the 2000s range so you can see here I have accounts created with two thousand twenty one hundred twenty two hundred and then - and then a name that is descriptive of what the account is representing so like the earlier example used I had a school loan you know balance debt I would create any liability account to represent that money that I owe somebody else so I'd give it a number in the 2000s range and then call it student loan debt or whatever so here I have a couple examples that counts payable which is you know short term money that you owe somebody else your credit card balance your property mortgage your you know your outstanding the money that you owe on a building your vehicle loan payroll taxes again all money that you owe someone else or some other entity but just haven't paid yet would be considered a liability okay your equity is in the 3,000 s range now this differs quite a bit for churches and nonprofits so with a business equity can be a number of things it can be retained earnings you can be stockholders equity it could be stock value it can be a lot of things but with nonprofits what I mean it can get pretty detailed as well but as a kind of a high level overview your funds are going to be created as equity accounts in your accounting system so like I used earlier the the general missions and building fund I'll say I also have a special projects fund so again these are areas within my organization that need to be tracked separately and they have their own kind of residual value they have their own balances their own income and expenses so there are like completely separate entities within my organization so I would create an equity account to represent their balance and that would be three thousand something so three thousand thirty one hundred thirty two hundred and then general fund the mission's fund building fund special projects fund and these accounts through this through the use of transactions and keeping everything kind of in line would track my overall balance for my fund that I have created okay next we have income and income and expenses which is next are kind of the there the more the easier accounts to kind of think of and track and explain because these are the ones you're going to be using on a more daily basis so income is numbered in the for thousands range and income is again any way that you receive money so not any person that gives you money or anything that gives you money or any place that gives you money this is anyway any avenue of money flowing into your organization so you can see how absolutely excuse me some examples I have four thousand contributions income so any money that I received via contributions I would use this income account same with designated donations anything that's kind of being tucked away for whatever purpose I could use that pledge income grant income sales revenue any again any way that you receive money you're going to want to create an income account for it with a number in the 4000s range and a name that is descriptive of the way that you're receiving the my and then lastly here we have expenses and expenses are in the 5,000 plus range and the reason for the plus is well because it's last and so you can do whatever you want with it but really you have more expenses than you do anything else most often so expenses are ways that you spend money again not places or people that you pay but ways that you spend money so salary expenses rent or mortgage office supplies meals and entertainment fundraiser supplies utilities you know equipment you know anything that you purchase any way that you want to spend money would be an expense account again with a kind of 5,000 plus range number and then a name that is descriptive of the way that you're spending money so at the end of the day you have all five different types of accounts represented with their respective accounts so assets liabilities equity income and expense and the total list here all of these accounts make what's called your chart of accounts you may have heard this before and a chart of accounts is really just it's a fancy way to say to your listing of accounts for your organization so when someone says you know hey on your chart of accounts do you have a category for you know this fund you can take a look at it tell them yes or no so that would be your chart of accounts okay so in an accounting system we had those three areas accounts transactions reports so this is accounts now what you do is take those accounts and you enter transactions and a transaction again is any kind of movement of money within or through your organization so this can be things like items purchased so expenses that you have made and now you've gained items revenue so you sold something and you made a buck off of it that's revenue donations another way of income debt paid which would be kind of an expense but also kind of a liability movement as well bank transfers so not income and not expense but just moving you know money from my checking to my savings account that is still regarded as a transaction invoice is sent so if you're you know writing up an invoice to send to a customer to say you now owe me this amount of that is income and assets and a couple other things at play and then fund transfers moving money kind of changing hands so if I was gonna not you know not a bank transfer but you know if I have within my bank if I have five thousand dollars tucked away for my admissions fund but I want to transfer some of that back to my general fund that is a fund transfer so you can kind of change hands move money around and that is also considered a transaction now transactions is it's a very deep topic and this is really where the the wheels come off for a lot of people and the reason being is because it is so broad I mean these are only seven examples of transactions but this goes into a billion other things so what I do typically here is pause and kind of push this off to the side and say if you want more information on how to enter transactions what the difference between single and double entry accounting is as well as how to debits and credits play into the whole mix not debit credit cards but debits and credits in an accounting system that is something that we would be more than happy to provide but for today's purposes because that we can kind of follow the rabbit on that for a while I'll pause on it if you have any questions let me know but just keep in mind that a transaction is a again a movement of money in or within your organization that uses your accounts to kind of track balances so lastly we have reports and a report again is kind of the answer to a question like how much money do you have how much money have you earned or spent within a given time frame or how much money is set aside for your funds people can also ask you or you might ask yourself how much money have we spent on office supplies in the past six months or how much money have we gotten in donations versus last month you know this month versus last month and the month before or even the year before all of those questions are answered by reports okay and with nonprofits there's kind of three primary reports that IRS has has deemed and the first one here statement of financial position is the first one we're gonna take a look at and that's more commonly regarded as what's called a balance sheet you also have the statement of activities which is more commonly known as the income statement and then you have a more kind of specific report that is unique to fund accounting called the statement of functional expenses but let's take a look at the balance sheet first so the balance sheet shows what's called the accounting equation which is essentially your assets equaling your liabilities plus your equity an easier way to describe this is your assets minus the money that you owe equals your overall worth so remember the the previous example earlier on where I had ten thousand two hundred dollars but then so that was my asset that's money than I had but then I owed money for five thousand so that means my overall equity was five thousand two hundred dollars so here's another example so all my assets here on the left hand side I've got cash in my checking account accounts receivable and grants all of that equaling $19,000 okay total assets and then to the right is the other half so my liabilities I owe ten thousand two hundred dollars and then I have a loan for five thousand dollars as well so that means my overall equity is three thousand eight hundred dollars which is totaling nineteen thousand as well so whether it's assets equaling liabilities plus equity or assets minus liabilities equal equity both of those accounting situations work it's more commonly known as the assets equal liabilities plus equity but again the math is the same so it doesn't matter so that is your balance sheet now the balance sheet and the next one the income statement are the two primary reports that you're going to want to generate for your board and for anybody that kind of wants to know the financial position of your organization and secondly here the income statement the income statement shows the profitability of your organization within a given time frame and this is a different kind of equation but it's your income minus your expense equals what's called your net income so the money that you've gained minus the money that you've spent is your overall profit or loss for the period of time that you're reporting okay so here's an example the on the left hand side is just a really big picture and then on the right is the actual sample here so I've got my income I've got cash donations for ten thousand I've got grant income for seven thousand so I have a total income for whatever time range that is of seventeen thousand dollars below that I'm gonna list my expenses so in my expenses as I've paid rent for four thousand payroll for 8500 utilities for eight hundred office supplies for four so my total expense for this time period is thirteen thousand seven hundred dollars so income minus expense seventeen minus thirteen thousand and seven hundred dollars equals a net income or profit of three thousand three hundred dollars for the time period okay so that's your income statement so balance sheet shows your kind of snapshot of here's how much money I have oh and by overall worth the income statement shows kind of how you got there but within a certain time frame so how much money have I received and spent in the past you know a month or year whatever you want to report the last report here I don't have a real good example but the statement of functional expenses shows your organization's expenses broken down per fund and category so for instance you would have a let's say office supplies or I guess we'll just run with the administrative expenses so let's say I have an administrative expenses account okay that's one of my accounts that I track I'm spending money using this account this report would show not only how much money have I spent with this account overall but how much of that was for fun a fun be fun to see so again not just what's your total expense but what's your total expense in detail broken down per fund that you have created so that is the statement of functional expenses so recap what have we learned today well we were gonna answer three questions the first one was what is accounting and accounting is keeping track of your stuff so the money that you own oh spend receive and your overall worth all of that boils down into the process or practice of what's called accounting fund accounting is a division of accounting it's a further kind of classification that basically means you're tracking not only those five different areas but those five different areas for each fund that you have as an organization which again a fund is just kind of it's a distribution it's a it's a it's a it's a division within your organization that has its own balance its own income its own expense it's got its own kind of operation going and then lastly how do I keep track of my organization's finances so if you need to track accounting and specifically fund accounting you're gonna want to do so through an accounting system which would be used for your organization and in an accounting system you have three kind of primary areas which is to set up a chart of accounts and then to use those accounts in transactions which will then bleed into your reports which are answers to questions that either yourself or people will ask of you that you can generate based on the other information that you've entered in your accounting system okay so now it's time for my quick and shameless plug so again my name is Alex and I'm the support guy here at appleís along with our team of support representatives and what we do on a daily basis is help people get set up with atlas software now appala software is an online company that provides a couple of different products the first is accounting so all the stuff we just learned we have an accounting system online in place for you that tracks the fund accounting for your organization and we can teach you how to use it with no cost to you well the software cost the support is not doesn't cost you anything that's what I meant so we have accounting and then we also have donations which allows you to track the money that you've received through donations but also kind of further track your donors how much they've given you can also donate online to you via your website and then you can generate contribution statements for them at the end of the year we also have efiling capability so if you are a non-profit that needs to file the 990 series either the form 990-n or the 990-ez we can e-file that for you to the IRS and we also have over and oversight is a tool that you can use if you are a or a individual or a business that has to keep the books for multiple organizations so we have a number of clients that use us with oversight and they oversee multiple organizations for either financial accuracy or maybe they're providing a service like a CPA or a bookkeeping company to have access to multiple accounts but all kind of within the same one login so it's oversight and then lastly we will be coming out here pretty soon with a another product called donor relations which will allow you to further keep tabs on your donors so you can link family to one another so if Alex and Beth have both donated to me to the organization during the year instead of them receiving a you know separate giving statement you can combine them report them together you can also link different family members but the biggest functionality that's coming with this is being able to email from the system so if you're familiar with a Constant Contact or a MailChimp type program to be able to send promotional or campaign emails that is what we're working on right now so the benefit of all this now all of these products can be found elsewhere but to have all of them within one simple to use system that all is integrated with with itself so again the donations that you enter will go into accounting and then the donors that you just recorded can get an email from donor relations and you can e-file all what that stuff is all wrapped up into one system for you which is known as Aplos so all the products can be used independently but together is where they really start to shine so if you're curious if you'd like to start a 15-day free trial we have that available for you there's no commitment needed no credit card needs to be entered or anything like that all you do is click that blue button on our website that will start you with a 15-day free trial that you can start any one of our products and give that a shot and again all of our support is free and we'd be more than happy to answer any questions or help you get set up in our software