New Financial Year has just started, and everyone is busy in closing books of accounts of last year. Sometimes, the closing of financial year is done in the month of June or July. If Accounts and Finance running from one financial year to another as it is, without change, sooner or later, it will become absolute. So, this is my advice that at least follow this 5 things at the beginning of the Financial Year.
1. Annual Budget
NGO has establish to fulfill a mission with the vision in mind. And to achieve that, one needs long term plan which breakdown in a yearly column. That is called Annual Budget. Now a days, its a trend that from big funding agency to CSR companies to small donors, everyone asking whether you have prepared Annual Budget or not. The right time for the preparation of Annual Budget for NGOs is in the Last week of March or first week of April, not later than that. Read this blog on Annual Budget.
2. Changes in Multi-Year Projects
If you have multi year project, most likely budget of such project will change with the change in financial year. Mostly salaries and staff payments have incremental components and increase in the next financial year. Thus, Accountant must have to ascertain such changes in new financial year in particular budget and should communicate to program team well in advance.
3. Update Financial Manual
Financial Manual is a policy document and need to review every year. Every year, there are many changes in laws and regulations which affects the financial transactions of your organization. Generally, accountant used to start following the new laws and regulation but forget to modify Financial Manual Accordingly.
Cash Expenditure limit was decreased from Rs. 20000 to Rs. 10000. But still many NGO has the limit of Rs. 20000 in their Financial Manual. Nobody bothers to read and update it.
4. Splitting Tally Database
Mostly, Accountants in NGOs are lazy to split Tally company and whereby separating database according to Financial Years. I have seen many NGO accounts, where tally database is same since last 8 to 10 years. Obviously, because of this, size of database increase and speed to work in Tally getting slow to worse. So, It is advisable to split the tally company at the end of the Financial Year.
5. Chart of Accounts
Chart of Account is the base of accurate accounting and desirable presentations of Income & Expenditure Accounts and Balance Sheet of NGOs. As, compared to corporate, NGO do not have standard format for its Financial Documents. I observed, that accountant creates and alters ledger accounts as and when required. So, this is one of the important point to follow at the start of the Financial Year to prepare Chart of Accounts or modified according to the need.