Donations and grant tranches in the ledger
How the Non-profit pack posts donations, monthly gifts, bequests and grant tranches to their own income accounts, and the VAT treatment they start with.
By Achekam · · 4 min read · For Non-profit businesses in South Africa, Nigeria, Kenya
Launching soon. The Industry CRM add-on described in this article is launching soon. This article describes it as it will work at launch.
Ask a small non-profit's treasurer where income is recorded and the answer is often "in the income account". Donations from individuals, a corporate gift, a bequest from a long-time supporter and the second tranche of a foundation grant all land in the same place. The bank balance is right, but the board cannot see where its money comes from, and the annual financial statements need a reclassification exercise before they can be prepared.
That matters more for a non-profit than for most businesses. Grant income usually comes with conditions and reports. Donations from the public tell you how healthy your supporter base is. A bequest is a one-off that should not be mistaken for a trend. Mixing them hides all three stories.
The Non-profit & fundraising pack in Achekam's Industry CRM separates them from the start. This article explains the accounts, the starter items, the VAT treatment they begin with and why a person, not a feed, decides when a gift has arrived.
Two income accounts, not one
The pack posts its income to two accounts: Donation income (4480) and Grant income (4490).
The split follows the most important distinction in non-profit income. Donations, whether once-off, monthly or left in a will, come from supporters who give because they believe in the work. Grant income comes from funders under an agreement, usually tied to a programme, a budget and reporting dates. Boards, funders and auditors all read those two lines differently, and the income statement now shows them separately without anyone sorting invoices by hand.
The starter items
When the pack is switched on, it brings starter items for the kinds of income a non-profit records most:
- Donations: once-off gifts from individuals or organisations.
- Monthly donations: regular gifts from committed supporters.
- Bequests: gifts left in a supporter's will.
- Grant tranches: instalments of a grant paid under a funding agreement.
The donation items post to Donation income and the grant tranche item to Grant income, so the account follows from choosing the right item.
Outside the scope of VAT, and flagged
Each of these starter items is marked outside the scope of VAT, and each is flagged for the organisation to confirm with its accountant.
The flag matters. VAT on non-profit income is not always as simple as it looks. A grant agreement that asks for something specific in return, such as research the funder will use or advertising for a sponsor, may need a different treatment from a gift given freely, and South Africa, Nigeria and Kenya each have their own VAT law. The starting point the pack offers is a sensible default, not a ruling. In South Africa, SARS's VAT 414 guide for associations not for gain and welfare organisations explains how the VAT Act applies to them, including donations and which of their supplies are taxable or exempt. Before the first gift is recorded, take your main income types and your largest funding agreements to your accountant and confirm the treatment of each.
What switching the pack on adds to your books
Your organisation's ledger on Achekam starts from a standard chart of accounts, which you can extend, rename or prune. When the Non-profit pack is switched on, the two income accounts join that chart, and the starter items, all without prices, join the catalogue.
One thing can stop that: an account code the pack wants that your chart already uses for a different kind of account. In that case the pack is not activated, and you are told which code is in the way. Your accountant can renumber or move the existing account, after which activation will go through. Books that already carry several years of history are protected by that refusal.
Received means seen in the bank
In the pack, a gift is marked received by a person who has seen it in the bank. No bank, debit-order or payment feed is read.
For the ledger, that is a safeguard. A pledge, a promised transfer or a monthly debit order that has not yet run is not income. Nothing is treated as received until someone has checked the bank statement and confirmed the money is there. Give that job to one person in finance, and make it part of their weekly routine, so that confirmed gifts do not pile up unrecorded.
Invoice lines that name the account
With the Industry CRM, an invoice line names the revenue account and the product it sells, so revenue is posted per account. For a non-profit, the most common invoice is to a funder: many grant agreements ask the organisation to claim each tranche with a request or invoice. When that invoice uses the grant tranche item, the line names Grant income, and the posting follows.
The pack keeps Donations and pledges by fund and campaign as records, so the fundraising team can see which appeal or fund each gift belongs to, while the ledger shows donation and grant income on their own lines.
A set-up checklist
- Ask your accountant to confirm the VAT treatment of each income type and each major funding agreement.
- Check your chart of accounts for codes that could clash with the pack's income accounts.
- Switch the pack on and confirm Donation income and Grant income appear.
- Name the person who confirms gifts against the bank.
- After the first month, read the income statement and check that donations and grants sit on their own lines.
The income side is half the picture. For spending against each grant, see tracking grant spending against the budget, and for the welcome every new donor should receive, welcoming and thanking a new donor. If your accountant keeps your books, when your accountant sets up and pays for your books explains how that arrangement works.
Before you switch the pack on, book half an hour with your accountant to agree the VAT treatment of your income. Everything else follows from that conversation.
General guidance only, not advice on your own circumstances. Tax and payroll rules change: check the current position with the authority or your adviser.
