What is crowdfunding?
- By Book Keeping Pros
- Sources checked 15 Oct 2026
Definition
Crowdfunding is raising money for a business idea, project or product from a large number of people, usually through a crowdfunding website. Backers may give money as a donation, in return for a reward such as the finished product, as a loan the business repays with interest, or in exchange for shares in the company.
Each type of crowdfunding lands differently in the books. Money lent through a debt-based campaign is owed back to the backers, so it is usually recorded as a liability. Money paid for shares in an equity-based campaign is usually recorded as share capital. Reward-based money comes with a promise to deliver something later, so the business needs to track which backers are still owed their reward. How donations and reward money are treated in the accounts is a question for your accountant.
Where a platform takes its fees out of the money raised before paying the business, the amount that reaches the bank is less than the total raised. Recording the full amount raised, the platform's fees and the payout separately lets the deposit be matched to the campaign and shows what the campaign cost to run.
In Australia
business.gov.au's crowdfunding guide describes donation-based, reward-based, debt-based and equity-based crowdfunding. In its debt-based form, which it says is also known as peer-to-peer lending, backers lend to the business and are paid back over time with interest. Its equity-based form, known as crowd-sourced funding, is for eligible companies, which issue shares to backers and so raise funds without borrowing.
For equity-based campaigns, it says the crowdfunding website must hold an Australian Financial Services licence from ASIC, and describes the model as complex, with compliance costs and ongoing reporting obligations. It suggests checking a platform's terms before committing, including whether you keep the funds if the goal is not reached and what happens if campaign promises cannot be kept, which may mean refunding backers.
Its guide to choosing funding names crowdfunding among the most common sources of funding for small businesses, alongside venture capital and business loans, and notes that platforms charge fees for their use.
Worked example
| Item | Amount (AUD) |
|---|---|
| Total raised from backers | 18,000.00 |
| Platform fees taken from the funds | 1,260.00 |
| Amount paid into the business bank account | 16,740.00 |
Illustrative example only: these rows show the method and are not sourced data.
Common mistakes
- Recording only the net payout, so the platform's fees never show up in the books.
- Losing track of which backers have received their rewards and which are still waiting.
- Recording money lent through a debt-based campaign as sales income.
Related terms
Related service
Small business bookkeeping
Your books kept current, every month.
Sources
- Key financial terms
business.gov.au, Australian Government. Current at 15 October 2026, released 9 July 2024. Checked 15 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Crowdfunding
business.gov.au, Australian Government. Current at 16 October 2026, released 20 January 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.
- Choose your funding
business.gov.au, Australian Government. Current at 16 October 2026, released 18 February 2026. Checked 16 October 2026.
© Commonwealth of Australia 2020, licensed under CC BY 3.0 AU. Licence: CC BY 3.0 AU.