All members of the management committee, not just the treasurer, need to be across common financial terminology so that everyone is properly prepared to make good financial decisions on behalf of the club.
Accountability
The management committee is collectively accountable to the members and other stakeholders for the club’s financial position. In other words, while the responsibility might sit with the treasurer, the accountability sits with the entire management committee.
You can think of it this way – you can delegate responsibility, but you can’t delegate accountability.
Assets
Assets are the things that your club owns that will be used to generate income. This includes money in the bank, your equipment and your facilities.
Assets are divided into two categories – current and non-current.
Audit
An audit is a thorough independent examination of the club’s financial records and processes to ensure accuracy, compliance and transparency in financial reporting. Conducted by a qualified auditor, your annual audit report and audited financial statements (i.e. your Profit and Loss – P & L – Statement, Balance Sheet and Cash Flow Statement) are to be presented to members for review and adoption at your AGM.
A smaller club may not be subject to an audit – see Financial reporting for more detail.
Australian Business Number (ABN)
An Australian Business Number, or ABN, is simply an identifier that confirms that an organisation is conducting business in Australia.
Having an ABN is separate from being registered for GST.
Balance sheet
The balance sheet describes the club’s financial position at a specific point in time. It lists the club’s assets, liabilities and members’ equity, which is what’s left over after liabilities are subtracted from assets.
Because assets = liabilities + members’ equity, if your club’s assets increase, so will the overall financial stake that members have in the club. But if liabilities increase, that financial stake decreases – in extreme cases, this leads to negative equity and ultimately to insolvency.
Budget
A budget is a financial plan that forecasts income and expenses for a specific period, usually the next financial year. It will give the management committee an accurate picture of whether the club expects to make a profit or a loss during that period (remembering that occasional losses are fine as long as they are planned, rather than the unexpected result of poor financial management). A bad budget is one that uses rubbery figures to achieve an unrealistic result, for example artificially bumping up revenue to offset high expenses.
Monitoring actual financial performance against the budget helps identify red flags, which are items that vary significantly from the budget, thus enabling the management committee to take responsive action.
Reporting against the budget has three phases:
Business Activity Statement (BAS)
The BAS is a form used by businesses to report and pay their Goods and Services Tax (GST), Pay as You Go (PAYG) income tax instalments if they pay staff, and other tax obligations to the Australian Taxation Office (ATO). If your club is registered for GST, you will need to submit a monthly or quarterly BAS. You may need to remit additional GST if your sales collected more GST than you paid on your purchases or receive a refund if you paid more GST on your purchases than you collected from your sales.
Cash flow statement
The cash flow statement shows the club’s inflows and outflows of cash during a specific period, such as a month or a year. It includes operating activities (such as revenue and expenses), investing activities (such as purchasing or selling assets), and financing activities (such as borrowing or repaying loans). The statement shows the net increase or decrease in cash during the period and is useful for planning club activities because it highlights periods when cash is either likely to be tight or available. For club’s where income or expenditure is not spread evenly over a year (such as receiving all member registrations in the same month) the cash flow statement can be vital to ensure that sufficient funds are always available.
Expenses or expenditure
Your expenses or expenditure includes all of the money you spend running your club. This would include:
Goods and Services Tax (GST)
GST is the Goods and Services Tax applied to goods or services sold in Australia.
The registration threshold for not-for-profit (NFP) clubs ($150,000) is much higher than it is for for-profit businesses.
Why would a club register for GST? If your club is below the turnover threshold, you may still consider registering for GST for the following reasons:
If you need more information about the GST, check out the ATO not for profit portal
Income
There are a number of different terms used to describe a club’s income. Unfortunately, they are not always used in a consistent way!
Income or revenue or gross income or turnover is the total amount of money a club receives from things like:
The term net income is the total amount of money the club receives less the expenses that it incurs – this is also known as profit.
Income tax exemption
NFP sport and recreation clubs can self-assess their income tax status to determine if they are income tax exempt and not required to pay income tax in its own right.
Most grassroots sport and recreation clubs are income tax exempt. For more information, check out the ATO not for profit portal
Liabilities
Liabilities are money that the club owes – your debts.
Like assets, liabilities are also divided into current and non-current.
Members’ equity
Equity represents the current financial value of the club. It is what is left over after liabilities are subtracted from assets.
Not-for-profit (NFP)
Not-for-profit clubs provide services to the community and do not operate for the purpose of making a profit for members. All profits must go back into the services the club provides and must not be distributed to members, even if the organisation winds up.
Any profit made is reinvested in the club, not paid out to members as a dividend. The reinvestment could include the accumulation of funds in a bank account to ensure financial sustainability or for use at a future date (for example saving for large purchases like infrastructure or a co-contribution towards a large grant).
Profit or loss
Subtract the total of all of your expenditure from the total of all of your revenue.
Remember that not-for-profit doesn’t mean that you can’t make a profit. Profits enable you to achieve big goals for the club – the more profit you make the more activities you can deliver.
Profit and loss statement (P&L)
The P&L provides a summary of the club’s revenues and expenses over a specific period, as well as whether the ‘bottom line’ (the end figure when expenses are subtracted from revenue) shows a profit or a loss. It provides an overview of the club’s profitability by summarising income sources and expenditure items, giving a clear picture of the financial health and performance of the club.
Responsibility
Responsibility refers to the tasks and duties delegated to individuals or groups, such as the treasurer managing day-to-day bookkeeping or data entry. It can be shared or delegated among club members or committees.
You can delegate responsibility, but the management committee cannot delegate accountability – it always sits with them.
Solvency
Solvency, or being solvent, means having enough money to pay the club’s debts (invoices) as and when they fall due. Trading when insolvent is illegal and may result in your club being wound up.
UQ Sport reinvests all profits into services, facilities, and programs, and is supported by funding from the Student Services and Amenities Fee (SSAF) to benefit UQ students.
UQ Sport Ltd is a division of UQ Holdings.
