What Is a Charity and Why Do They Need Accounting Software?

• Charity
• Accounting
• Bookkeeping

A charity is a not-for-profit organisation set up to pursue charitable purposes for public benefit. For Australian charities, the accounting challenge is not only knowing whether money came in or went out. The charity needs records that explain donations, grants, restricted funds, program spending, supplier bills, bank activity and decisions made by responsible people.

Good accounting software helps a charity keep that evidence together. It gives the committee, treasurer, bookkeeper or accountant a clearer view of cash, commitments, projects and reporting readiness, without relying on one spreadsheet that only one volunteer understands.

Charity bookkeeping is about trust. Every donation, grant and supplier payment should be easy to explain, easy to find and easy to report.

Quick answer

Australian charities need accounting software because the ACNC says charities must keep financial and operational records, and those records need to show how the charity receives, spends and manages money. Even small charities that do not submit a full annual financial report still need records that support their financial position and activities.

Accounting software does not replace governance, a treasurer or professional advice. It gives those people better records to work with.

If the organisation is not registered as a charity, it may sit in a different not-for-profit tax pathway. The NFP self-review return guide explains the annual ATO checkpoint for many non-charitable not-for-profits with active ABNs.

Key points

• A charity needs records that connect donations, grants, spending, approvals and bank transactions.
• ACNC record-keeping obligations are separate from any tax, payroll, privacy, fundraising or grant acquittal rules that may also apply.
• A simple chart of accounts and regular bank reconciliation can prevent many reporting headaches.
• Free accounting software can work for small charities if it supports the charity’s reporting and control needs.

What makes charity bookkeeping different?

Charities often have more stakeholders than a small private business. Donors want confidence. Grant providers may require acquittals. Committee members need understandable reports. Regulators may ask for evidence. Volunteers need processes that survive role changes.

That changes the job of accounting software. A charity may need to separate:

• general donations from grant income
• unrestricted funds from restricted or purpose-specific funds
• program costs from administration costs
• cash donations from bank deposits
• GST, VAT or sales tax records where relevant
• payroll or contractor payments if the charity has workers

The software should make those categories visible without turning the treasurer’s job into a technical accounting project.

Records Australian charities should keep tidy

The ACNC explains that charity financial records must correctly record and explain transactions, financial position and performance. Operational records should also show how the charity remains entitled to registration and meets its obligations.

If your charity is unsure which records it must keep, get professional advice. Fundraising, payroll, grants, overseas activities and deductible gift recipient status can add extra requirements.

Why spreadsheets become risky for charities

Spreadsheets are flexible, but they can become fragile. Common problems include:

• no clear audit trail for changes
• formulas that break quietly
• donor or grant categories that are used inconsistently
• receipts saved away from the transaction they support
• only one volunteer knowing how the file works
• reports that take too long to prepare before meetings

For a charity, those issues are not just administrative. They can affect public trust, grant compliance and the board or committee’s ability to understand the organisation’s financial health.

What to look for in charity accounting software

Start with the workflows your charity actually runs each month.

Useful features include:

1. Chart of accounts that separates income, expenses, assets, liabilities and equity.
2. Invoices, bills, receipts and payments for everyday bookkeeping.
3. Bank imports or bank statement upload so transactions can be matched and reconciled.
4. Project or tracking categories for grants, programs, fundraising events or locations.
5. Reports that the treasurer can explain to non-accountants.
6. User access that lets more than one person work without sharing one login.
7. Document storage or a consistent external file process for evidence.

Gimbla can help small charities keep core accounting records organised with invoices, bills, receipts, bank reconciliation, GST or sales tax settings, reports and project tracking. If the charity handles GST, start with the GST, VAT and Sales Tax guide.

If the organisation is still comparing free options, see the focused guide to free nonprofit accounting software in Australia.

A practical monthly charity bookkeeping routine

Use a simple rhythm rather than waiting until the annual report is due.

1. Import or enter bank activity.
2. Match donations, grants, supplier payments and reimbursements.
3. Attach or store receipts, invoices and approval evidence.
4. Reconcile each bank account.
5. Review unusual transactions and uncategorised items.
6. Run a Profit and Loss, balance sheet and project or grant report.
7. Share plain-English notes with the committee before decisions are made.

This routine gives the charity a living set of records, not a year-end clean-up job.

Frequently asked questions

Do Australian charities need accounting software?

Not always by law, but they do need appropriate records. Software is often the easiest way to keep those records clear, searchable and useful for reporting.

How long should ACNC charity records be kept?

The ACNC says registered charities must keep certain financial and operational records for seven years. Other laws, grants or contracts may require extra records or different retention periods.

Can a small charity use free accounting software?

Yes, if the free plan covers the charity’s actual needs. Check whether it supports enough users, reports, bank reconciliation, tax settings, project tracking and evidence handling.

What should a charity review each month?

Review bank reconciliation, unpaid bills, restricted funds, grant spending, donation income and key reports. A short monthly review is easier than rebuilding a whole year later.

Conclusion

Charity accounting software should make trust easier to maintain. The goal is not to create more administration. It is to keep financial evidence, reporting and decision-making close together.

If your charity is moving away from spreadsheets, start with the basics: a clean chart of accounts, reliable bank reconciliation, clear grant or project tracking, and reports that responsible people can understand before they approve the next decision.