If you’ve recently stepped into a treasurer role for your PTA, community garden, or local sports league, you might be wondering about the best way to handle your organization’s books. There are different approaches to accounting, and choosing the right one can make your job much easier.
Cash accounting (also called the cash method or cash basis accounting) is a safe bet for most small volunteer-led nonprofits.
What is cash accounting?
Cash accounting is exactly what it sounds like: You record transactions only when money actually changes hands. When a member pays their annual dues, you record the income. When you pay for pens and paper at the office supply store, you record the expense.
With accrual accounting, you record income when you earn it (even if you haven’t received payment yet) and expenses when you incur them (even if you haven’t paid the bill yet). While accrual accounting provides a more complete picture of your long-term financial situation, it requires tracking future promises and unpaid bills—for many small nonprofits, the added complexity just isn’t worth it.
Cash vs. accrual accounting compared
Cash accounting | Accrual accounting | |
When to record income | When payment is received | When payment is earned |
When to record expenses | When payment is made | When expense is incurred |
Complexity level | Simple and straightforward | More complex, requires detailed tracking |
Time investment | Minimal ongoing maintenance | Requires extra time to track receivables/payables |
Bank balance clarity | Books show exactly what’s available now | Book balance may not match cash on hand |
Skill level needed | Basic bookkeeping knowledge | Advanced accounting knowledge |
Error risk | Lower (fewer moving parts) | Higher (more complex calculations) |
Best for | Organizations dealing in immediate transactions | Organizations with long-term contracts or credit |
Five reasons to consider cash accounting for your volunteer group
1. Simplicity is your friend
As a volunteer, you’re already juggling your treasurer responsibilities alongside plenty of other obligations. Cash accounting keeps things straightforward. No need to track accounts receivable or accounts payable. You just record what comes in and what goes out whenever it actually happens.
2. It matches how your organization operates
Think about how your group actually functions. When parents pay registration fees for the soccer league, that money goes into your checking account immediately. When you buy snacks for the fundraising event, you pay for them on the spot. Cash accounting mirrors these real-time transactions, so your books accurately reflect your organization’s true cash flow.
3. Your bank balance is clear
With cash accounting, your financial reports show exactly how much money you have available right now. There’s no confusion about outstanding invoices or unpaid bills that might affect your actual bank balance. This transparency makes it easier to make informed spending and budgeting decisions.
4. Lower risk of errors
The simpler your accounting method, the lower your risk of mistakes. Since cash accounting deals only with actual transactions that have occurred, there’s no risk of forgetting to record a future payment or miscalculating an accrual.
5. Perfect for year-based programs
If your group runs programs on a yearly basis—like a sports team by season or a PTO on a school calendar—cash-based accounting aligns naturally with how you actually handle the money. That’s not to say you can’t carry balances forward or raise funds for longer-term or specific purposes, but many of the groups MoneyMinder works with are focused on managing funds that support this year’s activities.
When to consider accrual accounting
Although cash accounting works well for most small and medium volunteer groups (typically under $200,000 in gross receipts per year), there are some situations where you might need to consider accrual accounting. If your organization extends credit to members or clients, manages large grants with specific reporting requirements, has significant inventory, or deals with multi-year contracts, you may need the more detailed tracking that accrual accounting provides. Additionally, if your organization is growing rapidly or considering major financial decisions, your board might benefit from the more comprehensive financial picture that accrual accounting offers.
The best cash accounting platforms
While you can certainly implement cash accounting in programs like QuickBooks, many of the platforms on the market are designed with accrual accounting in mind. You may find them unnecessarily complex (and expensive) for simple cash-based operations. Many smaller clubs and nonprofits find that specialized cash-based accounting systems are a better match for their needs.
MoneyMinder, for example, is designed specifically to help nonprofit organizations manage their finances using cash accounting. Rather than forcing you to navigate features you don’t need, it focuses on straightforward tracking and makes reporting simple for volunteers to manage.
Transitioning to cash accounting
If you’re currently using a more complex system or inheriting books from a previous treasurer, transitioning to cash accounting doesn’t have to be overwhelming. Start by consulting your board to ensure everyone understands and supports the change to cash accounting. Next, check compliance requirements to verify that cash accounting meets any regulatory requirements for your organization type. Document your process by creating simple procedures for recording transactions consistently, and train backup volunteers to ensure at least one other person understands your system.
Ready to Get Started?
For more guidance on managing your non-profit’s finances effectively, explore these helpful resources:
- Setting Up Your Chart of Accounts – Learn how to organize your financial categories for clear reporting
- Monthly Financial Reports That Make Sense – Create reports your board and members can actually understand
- Budgeting Basics for Small Non-Profits – Plan your organization’s financial future with confidence
- Getting Started with MoneyMinder – See how our cash-based system can simplify your bookkeeping
