Correct Association Finance & Bookkeeping Guide

Q: What does the new Bookkeeping Act require of sports clubs?

The new Bookkeeping Act requires sports clubs with a turnover exceeding DKK 300,000 for two consecutive years to use a digital bookkeeping system. All purchase vouchers, receipts, and invoices must be digitized and stored for at least 5 years. It is essential for the correct handling of association finances to ensure full digital documentation of all cash flows.

Q: How are tax-free allowances correctly paid out to volunteers?

Tax-free allowances may only cover documented expenses for items such as telephone or administration within the Danish Tax Agency's (Skat) annual rates. If a fixed amount is paid without specific breakdown or documentation, it is considered taxable B-income. Correct bookkeeping therefore requires CPR validation and precise categorization of each payment to avoid fines and back taxes.

Q: Are membership fees in sports associations subject to VAT?

No, membership fees in non-profit sports associations are generally exempt from VAT. However, the association must be aware of VAT liability if it has commercial income, such as merchandise sales or café operations, exceeding DKK 50,000 annually. If this limit is exceeded, the club must register for VAT and handle VAT on those specific sales activities.

Financial management in a modern sports club is about more than just balancing income and expenses. With stricter requirements in the Bookkeeping Act and complex rules for tax-free allowances, precision is required to ensure legal and efficient operation. This guide reviews the critical points in the correct management of association finances and bookkeeping, so club leadership can focus on sporting ambitions without worrying about compliance or liquidity shortages.

Compliance with the new Bookkeeping Act

The revised Bookkeeping Act has brought significant changes for sports clubs, especially regarding the digital storage of vouchers. It is no longer sufficient to keep physical folders in a cupboard in the clubhouse. For clubs with a turnover exceeding DKK 300,000 in two consecutive years, there is a requirement to use a digital bookkeeping system.

Correct management of association finances and bookkeeping now implies that all purchase vouchers, invoices, and receipts must be digitized and stored for at least 5 years. Systems like Billy, Dinero, or Economic are popular choices as they automatically time-stamp vouchers and ensure backups. If the club uses specialized systems like Holdsport or MinForening for membership fee collection, these integrations to the financial system must be documented so the auditor can follow the flow of money from member to bank account.

Requirements for digital storage

Voucher type	Format requirement	Retention period
Purchase invoices	Digital (PDF or image in system)	5 years from the end of the financial year
Payroll/Allowances	Digital with CPR validation	5 years
Sponsorship agreements	Signed digital copy	5 years after agreement expiry
Bank statements	Digital integration (Bank feed)	5 years

Tax-free allowances and B-income

One of the most complex areas of club finances is the payment of cost allowances to volunteer coaches and leaders. Many clubs make the mistake of paying fixed amounts without checking actual expenses, which can lead to the amount being considered taxable salary (B-income).

For an allowance to be tax-free, it must cover documented expenses for, e.g., telephone, internet, or the purchase of sports equipment. The tax authorities (Skat) set annual rates for the maximum amount that can be paid out without documentation. In 2024, the rates are, for example, DKK 2,450 per year for telephony and internet and DKK 1,500 for administration.

Scenario: A youth coach in a football club receives DKK 5,000 annually as a "thank you for your help." If this amount is not split into specific allowance categories (e.g., DKK 2,450 for telephone and DKK 2,550 for clothing/administration), the entire amount must be reported as B-income to eIndkomst. The club risks a fine and a claim for back payment of AM-contribution if this is not handled correctly from the start.

Structuring invoicing and accounts receivable management

Poor liquidity in sports clubs is often due to a lack of follow-up on outstanding payments. Whether it concerns sponsor invoices or membership fee arrears, there must be a fixed process. An effective invoicing routine minimizes the need for credit lines and ensures that the club can pay its own creditors on time.

Optimizing the invoicing flow

Sponsor invoicing: Invoice immediately when the agreement is made. Use EAN invoicing for public partners and larger companies to avoid manual processing time at the recipient's end.
Reminder procedure: Implement a fixed 8-14-30 day rule. The 1st reminder is sent 8 days after maturity without a fee, the 2nd reminder after 14 days with a DKK 100 fee.
Automated payment: Move as many members as possible to automatic card payment or direct debit. This reduces administration by up to 70% compared to manual bank transfers.

Handling specific operating expenses

In daily life, the treasurer encounters expenses that require special attention to maintain the correct management of association finances and bookkeeping. Here are two classic examples from club operations:

Mileage allowance for away games

Volunteers can receive tax-free mileage allowance according to state rates, but only if a logbook is kept. A logbook must contain the date, purpose (e.g., "Away game in Herning"), start and end destination, and the number of kilometers driven. Without this documentation, the club may not pay a tax-free allowance. Many clubs choose instead to pay a lower rate or let the coach cover the driving via the general cost allowance.

Purchase and handling of clothing packages

When the club purchases clothing packages for members, it must be clarified whether the clothing is the club's property or the member's private property. If the member pays for the clothing via the membership fee, VAT must be handled correctly. If the club provides clothing with sponsor logos, the value of the exposure must be matched by the sponsorship income in the accounts. It is recommended to keep stock records of clothing packages to avoid loss and ensure correct valuation in the annual accounts.

Budget follow-up and liquidity budget

An operating budget is not enough; a club needs a liquidity budget. While the operating budget shows if the club has a surplus over a year, the liquidity budget shows if there is money in the bank on the 1st of every month. Sports clubs often have uneven cash flows, where membership fees fall in August and January, while expenses for pitch rental and referees fall continuously.

The treasurer should present a monthly follow-up to the board, comparing realized figures with the budget. By using a system with bank integration (e.g., Billy or Economic), this process can be automated so that the board always has a real-time picture of the finances.

FAQ: Frequently asked questions about association finances

Does a small sports club need an auditor?

It depends on the club's statutes and any requirements from the municipality in connection with facility subsidies. Most smaller clubs can make do with an elected auditor among the members (layman's audit), but larger clubs or clubs with employees should consider a registered auditor to ensure correct reporting of tax and VAT.

Can we give coaches gifts tax-free?

Small occasional gifts (e.g., a basket for a birthday or a Christmas gift) are generally tax-free as long as the value is modest. If the gift has the character of payment for work performed, the value must be taxed as salary or an allowance.

Is there VAT on membership fees?

No, membership fees in non-profit sports associations are exempt from VAT. However, one should be aware if the club has commercial income (e.g., sale of merchandise or cafe operation) exceeding DKK 50,000 annually, as the club may then become liable for VAT on these activities.

How do we protect ourselves against embezzlement?

The best protection is the "four-eyes principle." Ensure that the treasurer can never approve payments alone. Most business banks offer a solution where one person creates the payment, and another (e.g., the chairman) approves it in the online bank. This is a cornerstone of the correct management of association finances and bookkeeping.

How often should we do the bookkeeping?

According to the Bookkeeping Act, transactions must be recorded as soon as possible after they have taken place. For an average sports club, it is good practice to book at least once a week or every fourteen days to maintain an overview of unpaid invoices and liquidity.

Checklist for the financial officer

Check that all physical receipts are scanned and uploaded to the digital system.
Verify that paid allowances stay within the Tax authorities' rates for 2024.
Review the debtor list: Send reminders to members and sponsors with overdue payment deadlines.
Reconcile the bank account with the bookkeeping (bank reconciliation).
Update the liquidity budget for the coming three months based on known match activities and tournaments.

Frequently Asked Questions

What does the new Bookkeeping Act require of sports clubs?

The new Bookkeeping Act requires that sports clubs with a turnover of more than DKK 300,000 for two consecutive years use a digital bookkeeping system. All purchase vouchers, receipts, and invoices must be digitized and stored for at least 5 years. It is essential for the correct management of association finances to ensure full documentation of all cash flows digitally.

How are tax-free allowances for volunteers paid correctly?

Tax-free allowances may only cover documented expenses for, e.g., telephone or administration within the Tax authorities' annual rates. If a fixed amount is paid without specific breakdown or documentation, it is considered taxable B-income. Correct bookkeeping therefore requires CPR validation and precise categorization of each payment to avoid fines and back payment of tax.

Are membership fees in sports associations subject to VAT?

No, membership fees in non-profit sports associations are as a general rule exempt from VAT. However, the association must be aware of VAT liability if it has commercial income, such as the sale of merchandise or cafe operation, that exceeds DKK 50,000 annually. Upon exceeding this limit, the club must register for VAT and handle VAT on the specific sales activities.

How does an association best protect itself against embezzlement?

The most effective protection against embezzlement is the implementation of the four-eyes principle. This means that the treasurer must never be able to approve payments alone. In practice, one person should create the payment in the online bank, while another, typically the chairman, approves it. This separation of functions is a cornerstone of secure and correct management of association finances.

Read more: CRM for sports clubs

Read also

Read more: CRM til sportsklubber

Guide: Correct Management of Association Finances and Bookkeeping