Start Investment Club - Investment Club Accounting: How and Why?

Investment Club Accounting: How and Why?

If you have been elected treasurer or secretary of an investment club - or if you are reading your club's operating agreement and bylaws - perhaps you have come to the section about how the books should be kept and how money should be handled. Maybe they're just not clear enough for your taste...or maybe you're just curious about what needs to be done before you consider running for the position within your group. Either way you go, we can offer a little bit of insight.

Morality and Accountability

The morality of accounting for your club's expenditures and income stems from laws governing fair practice. Honesty is good policy, especially when dealing with other club members -- and with such intimidating government entities as the IRS and the SEC. When you are your club's accountant, it would be a good idea to take down the names of your contributors, how much they contribute at a time, and how often. The total amount of money contributed to the club, minus running expenses, is your budget for investments.

And believe us, there are expenses for running your club!

Registration with the NAIC is one such expense, but in the long run it will probably save your investment club time and money. BetterInvesting offers a number of different software applications to make electronic book-keeping easier...And yes, the software does cost. We'll talk more about that later.

Keeping the Portfolio

Not only should the club's accountant keep track of the influx and outflow of money, but he or she will likely also be charged with keeping track of the club's portfolio. If you have a diverse set of stocks and properties, you'll probably be pleased to watch the cash base of your investment club grow and grow. As the accountant of the investment club, you will probably also have the authority to suggest re-investing capital gains or using them for the general betterment of the club itself. All of this is made less difficult by the use of software. Here's how.

Using Software

Access to a computer and competence with accounting software has become almost mandatory in the world of real-time streaming stock market quotes and split-second timing for buying and selling shares. Keeping the books on the computer is an easy way to make sure that they are correct, since many types of software has built-in checks to see if your flow of money - and your taxes - has been tabulated properly.

Don't worry if you're not an expert on things like QuickBooks! Many programs also have tutorials for new users. You don't need to have an accounting degree in order to keep the books...although it would probably help! We have these suggestions: educate yourself. Look at how the books were prepared by the person you're succeeding. Read your club's bylaws. Finally, follow the golden rule: have fun with it! You shouldn't dread your duties, after all.

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