Finances

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This page should serve to document how we keep track of finances at AHA. This is necessary for running AHA.

This is the responsibility of the Finances committee, and the Treasurer.

Responsibilities

So you want to help? You are awesome! Here's the tasks and responsibilities, and how to do them. These must happen for a happy, healthy hackerspace. Some are monthly, yearly, weekly, or as needed.

  • Deposit cash/checks into our bank account
  • Keep Freshbooks accounting accurate
  • Make sure all our bills are paid
  • Make monthly reports for the board/members/public
  • Make financial projections, so we can properly plan/budget
  • Handle all financial filings (taxes)
  • Keep this documentation accurate and helpful!

Accounting

This is crucial! Accurate accounting lets us file taxes, make projections, track invoices, be transparent about our finances, and generally function. Thankfully Freshbooks makes this much easier.

You should use Freshbooks to:

  • Mark recurring invoices paid (when you deposit checks)
  • Add invoices for cash/check income (donations, classes, memberships) and mark them paid
  • Add invoices for membership subscriptions (PayPal) and mark them paid
  • Add expenses which can't be automatically imported (PayPal fees)
  • Generate monthly reports
  • Verify that deposits seen in our bank account match with income recorded in our invoices

The complicated part right now is inspecting PayPal transactions. PayPal takes their fee before sending to our bank account, so we need to examine PayPal activity to accurately account income, and PayPal fees. This generally looks like:

  1. Review that month's PayPal activity, logging payments for membership in the "Membership Subscription" invoice.
  2. All other payments are donations, those go in the "Cash Donation" invoice.
  3. Log the total sum of PayPal fees as an expense for that month.

Invoices

We use recurring invoices for corporate members, and manually create invoices for other income: cash/check income, and PayPal income. These both fluctuate, but still have to be tracked. All income must be tracked with invoices.

Membership Subscriptions

This tracks our income from non-corporate members. Each month should have an invoice for "Membership Subscriptions", with date of issue and due date set to the last day of the month. This tracks how much income we have from members. This includes all membership payment methods; cash, check, and PayPal.

When you deposit cash/check membership payments, just add a line for them in the invoice. PayPal membership subscriptions take a little bit more work, because PayPal takes their fee _before_ they dispense the money to our bank account.

  1. Download a CSV report of that month's activity from PayPal
  2. Open the CSV report in a spreadsheet program. We'll be using LibreOffice Calc
  3. Select the first row, then autofilter with *Data > AutoFilter*
  4. Only view transactions that are membership payments
    • Type column > no "Auto Sweep", "Donation Payment" or "General Payment"
    • Make sure a payment is for a membership subscription. Some members may manually pay, and thus not have their payment in the "Subscription Payment" Type
  5. Select the "Gross" column. The Sum is automatically calculated and show in the bottom right, next to "Average"
  6. Add this sum as a line item called "PayPal" for this month

"Cash" Donations

Each month should have a draft invoice for "Cash Donations", with date of issue and due date set to the last day of the month. Every donation in a given month gets a line in here. This covers one-time events such as Penguicon, and is a bit of a catch-all.

When we deposit a donation, add a line item for it, such as "Laser Class" or "Donation". Add a payment for the invoice, since you've just deposited it. At the end of the month, no more donations can happen for that month, so it can be considered "done", start one for the next month.

If you notice online donations (directly deposited, FB, Amazon Smile, PayPal, ...), make lines them too. This can look like a deposit in our bank account from Facebook, or directly from an individual. You will need to check PayPal manually, not just look at the bank account.

  1. Download a CSV report of that month's activity from PayPal
  2. Open the CSV report in a spreadsheet program. We'll be using LibreOffice Calc
  3. Select the first row, then autofilter with *Data > AutoFilter*
  4. Only view transactions that are income that aren't membership payments
    • Type column > no "Auto Sweep" or "Subscription Payment"
    • Make sure a payment is a donation. Some members may manually pay, and thus not have their payment in the "Subscription Payment" Type
  5. Select the "Gross" column. The Sum is automatically calculated and show in the bottom right, next to "Average"
  6. Add this sum as a line item called "PayPal" for this month

Recurring Invoices (Corporate Memberships)

These are currently only for corporate memberships. They get the invoice automatically sent, and reminders if they're late on payment. When we get paid for an invoice, we mark it paid in Freshbooks. All that's necessary is updating these recurring invoices when corporate memberships change.

Billing happens differently for our corporate members. This is important because the accounting will be different for them:

  • Nostrum pays by check. Get it in the mail, deposit it. If the amount changes, change the Freshbooks invoice.
  • Spark is charged by us via Forte. We get the money automatically, and the processing fee shows up as an expense in our bank account (and is automatically imported). If the amount changes, change both the Freshbooks invoice, and the Forte recurring charge.

Expenses

Expenses are automatically imported from our bank account, but there's still some work we need to do.

  • Review imported expenses for duplicates, and make sure they're properly categorized (client/type)
  • Add expenses which must be manually created
    • PayPal processing fees

Here's one way to calculate the PayPal expenses for a month. This must be done because PayPal takes their fees out before sending to our bank account, so we don't automatically import that expense.

  1. Download a CSV report of that month's activity from PayPal
  2. Open the CSV report in a spreadsheet program. We'll be using LibreOffice Calc
  3. Select the first row, then autofilter with *Data > AutoFilter*
  4. Only view transactions that have fees
    • Type column > no "Auto Sweep"
  5. Select the "Fee" column. The Sum is automatically calculated and show in the bottom right, next to "Average"
  6. Add this sum as a PayPal Fee for this month
    • Set the Vendor to PayPal
    • Set the category as "Bank Fees"
    • Enter the total

Balancing the Books

Download a CSV of activity on our bank account for that month. We want to make sure that all money going in and out is accounted for.

  1. Download a CSV report of that month's activity from the bank
  2. Open it in LibreOffice Calc
  3. Log in to Freshbooks to review invoices/expenses
  4. Go down the transactions making sure credits are accounted for in one of that month's invoices that are marked paid, and debits are accounted for in an expense
    • Expenses should be automatic
  5. If there's a transaction in the bank account that isn't accounted for in Freshbooks, start doing detective work to figure out what's going on!
    • Sometimes there are small discrepancies because transactions only happen on business days. eg: PayPal payments at the end of the month.

Reports

At the start of each month, we should make sure the previous month's accounting is completed, and make reports on it for the board/members/public. This is easily done through Freshbooks. Do this before the board meeting, so that any financial talk that happens can be informed.

  1. Log in to Freshbooks
  2. Navigate to Reports
  3. Make a Profit & Loss report for only the last calendar month
    • Set a custom time range to the previous month
  4. Save a presentable copy. I do this by printing to a file
  5. Upload the file to our public financial reports folder for the corresponding year/month
  6. Do the same for an Expense report
  7. Do the same for any other reports we've decided to do.
  8. Send and email to the member's list with a summary of the reports, notable activity, and important take-aways, and links to the reports.

Taxes

We currently need to file two things: income, and sales tax. Failing to file will get us fined, and is basically just burning money. File the taxes!!!

Income

If we make less than $50,000 in the tax year, the form is basically "I attest that I made less than $50,000". Simple! If we make more than that (hasn't happened recently) then it gets more complicated. Use our records in FreshBooks to get the numbers for the paperwork.

TODO: link to tax forms, deadline info.

Sales Tax (MI)

We are registered with the State of Michigan as an entity which has sales, and thus collects sales tax. This is from back when we sold snacks, pop, and things like arduinos. Sales tax is for the individual, thus we have to collect it, and pay it to the state of Michigan. *We have to file even if we have $0 in sales*. Failing to file gets us charged late fees, and sent letters from the State claiming we owe them a bunch of money. That sucks.

We currently have no sales, but if we did, they should be classified as such in Freshbooks, with the sales tax collected recorded. This way we know what to pay the state at the end of the year.

If we decide to never have sales, we can file to remove our classification as an entity having sales, meaning we no longer have to file sales tax reports. It's probably best to just file a simple return annually and retain the ability to sell stuff.

TODO: link to tax forms, deadline info.

Budgeting

Doing all this, you should have a clear view of how much money we can count on receiving each month, and how this stacks up with our expenses. Use this to recommend courses of action for making more money, cutting costs, investing in tools, etc. This is also important for projecting our near-future finances for planning purposes. For example, are we quickly running out of money in our emergency fund? Or are we banking enough to invest in new equipment in X months?

Some expenses are fixed or necessary (like rent), while others may fluctuate, like buying supplies. Similarly, some income is relatively reliable (memberships), while some fluctuates (classes, one-off events). For a conservative projection erring on the side of caution, include stable things like rent, utilities, and memberships, insurance payments. It's also worth estimating incidental expenses, since those seem to always come up. Don't count on classes or donations, since it's possible we'll have a bust month, and won't want that to ruin our budgeting.

This is also important info for fundraising, because it'll give us clear goals. Are we fundraising to cover operating expenses, or are we able to fundraise to buy more equipment, or run a specific project?