Clubs face unique accounting and bookkeeping challenges because they’re governed by different laws, rules and regulations than normal businesses.
The way your club generates revenue, keeps financial records, and qualifies for tax concessions depends on your circumstances. Federal, state and local laws are different for not-for-profit (NFP) clubs (such as community service clubs or local sporting clubs) and for-profit clubs (such as gaming and entertainment clubs). Many clubs that don’t have the staff or expertise to handle bookkeeping internally choose to outsource to professional partners such as Sundaram Business Services instead.
Clubs rely heavily on memberships and donations for revenue
Clubs generate their primary source of revenue through membership fees, donations, and fundraising events. However, because NFP clubs and for-profit clubs have different operational goals, the way they generate and spend revenue is also different.
For example, the primary goal of a NFP club is to cover the costs of running the club. Any excess revenue NFP clubs generate is reinvested back into club activities for the benefit of members. A for-profit club, on the other hand, aims to generate a profit for its owners or stakeholders. For-profit clubs usually have additional sources of income to generate revenue beyond their expenses, such as ticket or merchandise sales, food and beverage sales, sponsorships, venue rentals, and gaming revenue.
Recordkeeping requirements for club grant funding
Grants from local councils, state and federal governments, trusts and foundations, and commercial organisations provide another critical revenue stream for clubs. For-profit clubs can apply for grants in some cases, but given NFP clubs offer more charitable or community-oriented services, there are usually more grants available to them.
NFP clubs are required to comply with strict grant contract requirements, such as:
- demonstrating how your club will use the grant funds in your application
- creating separate accounts for each grant for greater transaction transparency
- tracking expenses the grant will be used to cover, record them in club financial reports, and match them with corresponding grant revenue
- complying with the terms and conditions outlined in the grant agreement, which may include submitting periodic financial reports to the grantor.
Keeping accurate financial records enhances your future grant applications by serving as proof your club uses grant funds correctly.
Does your club qualify for tax exemptions?
Your club may be fully or partially exempt from paying certain taxes, depending on your state or location. For example, in certain Australian states and territories, NFP clubs get tax concessions on a progressive scale for electronic gaming machine revenue. However, for-profit clubs such as hotels and entertainment and gaming clubs are required to pay higher tax rates.
Certain NFP clubs may also be exempt from paying income tax. Eligibility depends on your legal structure, purpose, and activities. The Australian Tax Office (ATO) provides worksheets to self-assess your club’s eligibility for tax-exempt status. All self-assessing organisations need governing documents that set out the purpose, NFP character, and requirements for how your club operates and makes decisions.
Tax-exempt filing requirements
Since 1 July 2023, clubs and NFPs seeking to maintain income tax-exempt status have been required to lodge an annual self-review form with the ATO. This came as a result of the 2021 Federal Budget when the Government announced $1.9 million to build an online system that enhanced the transparency of income tax exemptions claimed by NFPs.
Internal controls promote better club financial management
Internal bookkeeping controls are a crucial part of sound club financial management. They play a pivotal role in safeguarding your club’s assets, preventing fraud, and ensuring the accuracy and reliability of financial information. Consider implementing the following internal controls for your club:
- Keeping records – Maintain thorough, accurate and timely financial documentation to ensure transactions are transparent, easily traceable, and readily accessible for audits or reviews.
- Segregating financial duties – Assign distinct responsibilities to prevent errors or unauthorized activities. For example, the person who handles cash should be distinct from the person reconciling financial statements.
- Authorizing financial procedures – Ensure only authorized people have the power to approve and execute financial transactions. Use technology safeguards such as password vaults, data encryption, and access controls to boost security.
- Setting budgetary controls – Restraints will ensure your club adheres to financial plans and individuals don’t overspend your resources.
- Implementing training – Make sure each team member or volunteer is aware of their roles in maintaining internal controls.
- Conducting regular audits – Conduct periodic audits to detect and address potential problems.
- Creating internal reporting systems – Have a clear way for members to identify and report potential financial issues to be resolved.
How to automate your club’s bookkeeping with Sundaram
Even if you understand your club’s recordkeeping requirements, you may not have the resources or personnel to meet them. This is where outsourcing can be a cost-effective way of delegating bookkeeping to experienced professionals. At Sundaram, we have a team of 400+ experts with extensive knowledge and experience in Australian accounting and bookkeeping systems. We can help your club by providing accurate, high-quality financial reporting, fully compliant with all relevant standards and regulations. That way, you’ll be free of recordkeeping headaches, and you’ll have far more time to focus on what matters: creating value for your club and serving your members.
Sundaram Business Services is a business process outsourcing company with offices in Australia, India, and the UK. With over 20 years’ experience in the Australian market in providing outsourced teams to Australian businesses across Accountancy, Portfolio Management, Self-Managed Super Funds, and Mortgage Broker Support, our business becomes an extension of yours.
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