The 3 steps every charity should take to get a grip on their finances

Our founder Rachel Eden writes: So many people I’ve worked with or given charity finance training to are passionate about their charities and know that they need to get to grips with the finances. However most people involved in charities are not finance specialists (in fact a phrase I hear used is that the finances make some people ‘want to run a mile’).

Before you book any charity finance training, – which of course I do recommend – you should think about what you need to focus on to help you to get a grip on your charity’s finances.

I have identified three key steps based on working with many charities and also the years I have spent training charity trustees, staff and volunteers.

Whose job is this?

The first thing to note is that this is not the treasurer’s job – in fact all trustees need to take responsibility for the finances collectively. Of course the staff and volunteers of a charity are also often delegated this work so even if you are not a charity trustee you may be entrusted with some of this.

Step 1 – Compliance

Every trustee body needs to ensure that they are compliant with the law and their own governing document. The Charity Commission is a key source of information about this, but if your charity is also a company you need to follow Company Law as well. If your charity turns over more than £25,000 your Independent Examiner (more info here) is likely to be able to give you some advice and support with this.

In order to be compliant you will need to ensure that your annual return is submitted on time to the charity commission. Where appropriate you also need to submit your accounts to Company’s House and you should also check what obligations you have to HMRC. This may relate to VAT, payroll or even a corporation tax return. Their systems are not linked so if you update something with one of these the other bodies the others will not be notified. For example if you change address you’ll need to contact them separately .

Step 2 – Clarity

Once you have made sure you are compliant with the law those involved in your charity need to understand what the finances mean. The trustees, management and volunteers of a charity should understand where the money comes from, where it is going, how much you have left and what your cash position is.

This is where you should be able to review your charity’s Cash, Income and Expenditure, Balance Sheet – and within this consider the fund accounting. If you’re not sure about the details of this finance training will often cover these. Do make sure it is tailored to the charity sector as there are some differences between charity and business accounting.

Step 3 – Control

Knowing where your charity is currently should naturally lead on to you wanting to improve things and plan for the future. Once you have clarity about your charity’s finances you are able to take better decisions. This means your your charity will be able to the difference you know that it can make to your beneficiaries and your community.

This is where your budget is useful, but you should have an understanding of the cost of your services. You may need to consider the distinction between trading and grant funded work. Charity finance training may cover financial modelling or funding applications.

Taking action

Of course each of these steps is not a one-time action: and each of them can support the other. As you improve your control you will become more clear about your charity’s performance. As you improve your clarity you will be more compliant with your governing document and the charity commissions’ expectations.

Free Charity Finance training

If you want to get free help you may want to sign up to our monthly newsletter. This contains free tips, templates and even funding opportunities. When you sign up you get a free excel budgeting template – but more content is shared every month. There is never any obligation to buy anything – and we sometimes are even able to offer free training courses.

An example of Charity Finance Training

Charity Finance 101 | Charity Finances

If you’d like to know more about the steps I’ve outlined above and get more detailed help we cover these 3 steps and more in my new Charity Finance Course. I’ve kept it as bite sized as possible so it is just four self paced sessions of one hour each. An early bird discount is only available until 19th October 2020 – so don’t delay

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