How small charities can improve their financial management
Judith Miller, Partner, Sayer Vincent and Treasurer elect at Small Charities Coalition
To mark Small Charity Week (16th to 21st June) we are taking a look at some of the challenges of managing finance in small charities
Many small charities don’t have the luxury of having a finance team in place and can be reliant on trustees, volunteers and employees who are not necessarily finance experts. Although it can often feel like a complex area to manage, with a few simple processes in place it can be less daunting.
Below are a few tips on how you improve your financial management:
· Free resources and information
The Small Charities Coalition website has a very comprehensive resources section, which includes guides, useful templates and links to other useful websites. The Charity Commission’s website also has a ‘Money and Accounts’ section offering advice on charity reporting and accounts, investments, managing assets and resources and examples of annual reports.
· Finance skills more important than charity finance skills
Even the smallest charity needs someone with good financial skills and knowledge to ensure good financial management – they could be a trustee, a volunteer or staff member. They don’t need charity finance skills necessarily; just sound financial knowledge and great communication skills.
Think about offering training to individuals to improve their financial management skills. The Directory of Social Change and NCVO offer affordable guides and online training modules covering all aspects of finance. Cass Business School is running a financial leadership course, and organisations including the Charity Finance Group and accountancy firms offer training.
· Set up good processes and controls and involve others in financial management
Processes need to be established and documented for managing finance. The Charity Commission guide, CC8, on internal controls includes guidance and a useful checklist. Basic accounting records are a must to keep track of spend and these must be kept up to date, with bank reconciliations taking place at least once a month.
A cash flow forecast should be created to predict movements in the bank account and a good filing system or referencing system is needed so any document can be easily retrieved.
· Accounts - keep it simple and create a narrative
Regular management and annual statutory accounts should be presented in a clear and simple way for senior managers and trustees to understand. One tip is to create a simple narrative to go alongside the numbers, so whoever is reading it, from the Chief Executive to the trustees, can answer any questions the numbers throw up.
· Don’t assume it will be easy
Just because a charity is small, managing finance isn’t necessarily easy; it can be complex. Many organisations stumble into challenges around tax – particularly VAT. HMRC’s website has useful information and Sayer Vincent has a free guide on their website called “VAT made simple”.
Some aspects of financial management can be outsourced cost effectively. One of those is payroll. This can be quite an administrative burden requiring specialist knowledge but it is inexpensive to outsource.
Many small charities are doing a fantastic job managing finance and several shone in our financial leadership awards last year. One of these was The Toybox Charity that works with street children around the world.
Caroline Taylor, Director of Finance and Support Services for the charity won the award for ‘raising finance awareness’ for her contribution and effectiveness in successfully raising awareness of the concept ‘finance’ within charity.
One of the things she does to raise financial awareness is run workshops when their statutory results are published.
There is still time for charities to enter Sayer Vincent’s 2014 Financial Leadership Awards. Find out more at www.sayervincent.co.uk and nominate one of your colleagues before 21 July 2014.
Sayer Vincent also runs a course, in partnership with Cass CCE and CFG, on Inspiring Financial Leadership (http://www.sayervincent.co.uk/render.aspx?siteID=1&navIDs=1,804#.U4xi_igtqZR)