I can't tell you how it's "supposed to be done," but I think I saw that kind of thing included as a list of "outstanding checks." Those were checks issued, but not yet deposited/cashed by the recipient. That way you account for the fact that you wrote the checks, but don't show the actual expense/deduction until the month is clears in the bank.

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Slowguy

(insert pithy phrase here...)

I was the president of a very small non-profit and this is exactly how we did it. I don't know if there is a better way, but this worked well for us.

The way I did it was to record the expense at the time the check is written.

On your monthly financials you would have.

Opening cash balance
Plus: Income
Less: Expenses (which would include checks written but not yet cashed)
Closing cash balance

Then you would reconcile to the bank statement.

Cash per bank statement
Less: outstanding checks (written but not yet cashed)
Adjusted cash balance

The two should match.

The banking delay doesn't then impact how you are reflecting the profit/loss of your organization.

This.

Plus 1, but...

The OP should ask around the bigger companies in his area and see if a cost control accountant would be willing to help/train his bookkeeper. My CFO and several of the bean counters volunteer a few hours a week helping worthy causes. Accounting is the number one thing that gets a company in the shits.

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"...the street finds its own uses for things"

Your post refers to reports that your organization has to “file.” With whom are you filing the reports? If it’s some government entity, I’d just call and ask them how to handle uncashed checks. You are getting answers on what makes sense for internal accounting purposes. But, that may not match what is required by the entity with whom you are filing the reports. Apologies if I am being too literal on your use of “file.”

Thanks! I will reach out and ask- just wanted to know what best practices are. I’m pretty sure they just want the report to match the bank statement. But as someone who plans fundraisers and expenses - I need to know that 50% of my bank balance is already spoken for in a check sitting in a file cabinet. And I need to get a new fundraiser set up for expenses we usually incur in June. (We have a target of no more than a $1,200 balance but there are times when I had $600 in checks not cashed- it’s not big money- which means a few checks make a big difference).

I added an outstanding checks line to my excel sheet I use- so I can see when checks were written for what and then when they are deposited.

Your intentions sound good. But you should not be the one filing any financial report because you do not know how to reconcile a bank account. That is a basic fundamental.

I am curious. Why do you write a check and then put it in a file cabinet?

I think Moonrocket is saying the county is sitting on the checks and not cashing in a timely manner.

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Favorite Gear: Dimond | Cadex | Desoto Sport | Hoka One One

The payee is the one sitting on the check

Your intentions sound good- but you don’t seem to have grasped not being a jerk to a volunteer who is actively trying to learn something and help improve the life of children in their community.

This is one of the skills we try to teach the kids in our club. Plus, not being afraid to learn new stuff even if it feels awkward.


I appreciate everyone’s help on this- I was able to find a newer form than the one I was told to use that does have a line for uncashed checks on it.

The other good news is the same org that holds checks for cashing also holds them for sending out and we just got a big check from a fundraiser last summer (that I assumed was already accounted for before I took this over) that has pushed us over our target and I’ve gone from worrying about having enough funds to if I will get in trouble for having too much. So I think I need to add a line for fundraisers performed but not cashed out. I’m learning a lot. Any tips for how to account for this when we frequently don’t know what our split of the fundraiser $$$ is til checks come out- but have a roundabout idea from historic values?

ETA- I’m hoping to pass this on in the next few years- so hoping I can create something very clean and easy to pass on.

Typically, a business can't record income until they receive the check.

But they have an accounts receivable line - or something similar that says they don’t have it- but are due it, right?

I see most of the answers talking correctly about the concept of outstanding checks but I have also seen few references to income and cost that in my opinion are not completely correct.

Outstanding checks have only a balance sheet effect so in practice they effect only your ending balance list in excel.

Your total cash at the end of each period should be the cash in hand plus bank amount (reconciled) less the outstanding checks issued.
This is your total cash at the end of the period and the beginning balance of the new period (monthly, quarterly, etc). At the end of the new period you redo the exercise: cash in hand+ new bank amount - less new outstanding checks list.
So, during each new period you remove from the outstanding check list the checks that have been cashed and you add eventually new outstanding checks issued in the new period and not cashed by end period.

Just a word about why not effect on income and cost. The effect on income and cost is not with the payment method (a check, a wire, credit card etc.) but when you register the income and cost against account payable and receivable. It could be even at the same time but in accountancy are 2 distinct facts. And one important effect of that is that you should book for instance the cost not only when the check is cashed.

For instance, you have an electrician doing work in the office today. He finishes the work and you pay him with a check today the 23rd of April. Your booking should be the cost of the intervention against account payable (AP) and then you balance the AP with outstanding check issued. If the electrician doesn't cash the check within the end of April you still have the cost in April and your cash reduced by the outstanding check and AP equal to 0. If the electrician cashes the check within April you have still the cost in April, AP still 0 and the reduced amount in the Bank statement.

Fundraisers don't create an accounts receivable entry.

Even when it’s something like working a concession stand - something where you actually put in labor? Is there another name for it - or good way to track it?

If you have a concession stand, you would be receiving cash (or a credit card payment) that would be recorded as income.

If you are a 501c3 - the exception makes the rule, but unless you gross receipts are above 25k, you do not need to file a Form 990. You may need to file a form 990N.

How will you "get in trouble" for having to much other than meeting reporting thresholds to different government agencies?

As for your fundraiser - When the event is over - ask what your share is. Pretty simple.

However - reporting financial info to the government is not "easy" without a basic understanding of accounting.

I appreciate your help! The level above us does and then at some point in the future they break it out and send us our “share” but how do I account for it between when we do it and when the check shows up which was like 5 months this year and if we had not received the check no one would have known due to volunteer turnover and no current accounting for it til it showed up.

We had a very brilliant lady running this for a long time who kept a lot of the details in her head and ran a tight ship meeting all of the reporting requirements. I’m trying to replicate her head in excel- because I think visually and we have three volunteers who replaced her - so we have to communicate a lot between us. So I want the situation clear to all of us at all times.

You don't account for it until you receive the check.

You can simply make a note to yourself that you are expecting around $x from the fundraiser.

I can’t speak to OP’s situation, but from non-profits I have served on there can be an issue with having “too much” cash. Some people may object to the level of membership dues if the organization appears to be stockpiling money.

[You don't account for it until you receive the check.

You can simply make a note to yourself that you are expecting around $x from the fundraiser.[/quote]

If it's a commitment you actually do record it as a Contribution or Grant Receivable (depending on which it is)

The books should reflect it so that anybody that reads the financial statements can plan accordingly.

If it's a commitment you actually do record it as a Contribution or Grant Receivable (depending on which it is)

The books should reflect it so that anybody that reads the financial statements can plan accordingly.[/quote]
Thank You! So this month we did a Qdoba fundraiser. If we were told we made $300 - but they cut a check to the level above us who then deposits it and cuts us a check (they have the charitable status- we are a sub entity). Between now and when I deposit the check I can put $300 on a line called Contribution Receivable?

Thank You! So this month we did a Qdoba fundraiser. If we were told we made $300 - but they cut a check to the level above us who then deposits it and cuts us a check (they have the charitable status- we are a sub entity). Between now and when I deposit the check I can put $300 on a line called Contribution Receivable?[/quote]

I would think that you would need a written statement with a specific dollar amount for a commitment.

After receiving the commitment, you could record a Contribution Receiveable. However, if it was for $300, I can't imagine why you would make an entry for such a small amount.

Thank You! So this month we did a Qdoba fundraiser. If we were told we made $300 - but they cut a check to the level above us who then deposits it and cuts us a check (they have the charitable status- we are a sub entity). Between now and when I deposit the check I can put $300 on a line called Contribution Receivable?[/quote]
Yes. Hopefully this doesn't get too nerdy, but doing it this way is how you do it under an accrual basis of accounting. There are a lot of small entities that operate purely on the cash basis of accounting where you only recognize transactions when cash changes hands. Accrual accounting is how the majority of companies operate because items got recorded when they happen, which is frequently different than when they're paid for. However, it is more complex so small entities sometimes choose to operate on a cash basis.

The way I tracked it to help remind me was to have a budget column next to the actual column.

In the budget column I could record things such as expected income from each category including fundraisers, as well as expected expenses.. this would give me a visual of how the year is playing out and what is to come in the future..

In addition it would show me where we over/under spent or received more or less income for future planning.

Something like this.

see attachment

This would suggest that we have received our membership fees and are $100 above expected. It would indicate that we expect to receive $500 from fundraising but haven't received it yet..

You'd have the same for expenses..

Hope this helps..

I would think that you would need a written statement with a specific dollar amount for a commitment.

After receiving the commitment, you could record a Contribution Receiveable. However, if it was for $300, I can't imagine why you would make an entry for such a small amount.[/quote]
Because that’s 25% of the target bank balance. We need to spend about 70% of the target balance between June and August on annual expenses. So, I need line of sight if I have to make the kids make nachos again or if we’re covered with current fundraising (nachos is at the concession stand -Qdoba did not let us make nachos). I also need to make sure the check actually gets cut and delivered to us and not forgotten- since the kids did the work. And the treasurer we have is really bright and I think would actually dig learning some of this stuff. So I’m going to learn more to show her. Heck, I might even take a class.

That and I’m a crazy stay at home mom who used to do product management for a tech company and is now going to kick ass on my $1,200 club account.

This really helps! I think I’ve always worked for companies that did accrual and this is cash.

I will keep doing my reports on cash as requested- but for my planning will use accrual or at least keep those lines under my cash accounting sheet. I don’t like not seeing the full picture in one look. And with three people sharing responsibility and collecting money I just think it will make it harder to miss something.