The secret of good financial management is to keep things simple, develop routines and get into good habits. People sometimes worry that financial management will be a very complicated, difficult and intellectual process. But in fact the best financial systems are very simple and easy to follow. The more complicated the system, the greater the chance that something will go wrong or that someone will make a mistake.
Remember, the legal responsibility for financial management lies with every member of your management committee and not just the treasurer. Your management committee and members must know who is responsible for the financial tasks in the organization and these should be ...view middle of the document...
Refugee community organizations that are set up as companies, or which are charities with an income over £100,000, have to prepare their annual accounts. However, their books and records which they keep themselves during the year can still be kept on the more simple ‘cash’ basis. Accrual accounts reflect not only what happened in a period (usually one year. For example, if you receive an electric bill the day after the year-end, in accruals accounting it would be included. So, unless you like making things complicated, stick to simple cash based accounting for your own system.
This content is adapted from information provided by the ‘Community Accounting National Network’. All organizations should aim to have some money held in reserve. Organizations have been criticized in the past for accumulating too much in reserve and not spending it on achieving their objectives. For small organizations, however, finding enough money to create any reserves at all is likely to be a bigger problem.
There is no set figure, but it is widely accepted that the general or uncommitted reserves should be maintained at a level approximately 25% of your organization's average annual expenditure. Some would say that this is the minimum, and that to have less is being at risk. Each organization should consider its own situation.
How secure is your future income? What is the value of your obligations under any contracts? How much would it cost you to close down?
A budget is the estimate of the income (receipts) that you hope to receive and the expenditure (payments) you expect to incur. Your organization should draw up annual budgets for individual projects and events, and for overall activity each year.
Monitoring and Revision
Fill in the Figures
Revise the Figures
To make sure your organization doesn’t run out of money during the year, you need to break down the budget and forecast cash flow month-by-month. Like the budget, the cash flow forecast is a prediction of what will happen, and in order to be of use, it needs to be prepared before the beginning of the financial year for which it is intended.
Grants are often received in installments Telephone bills usually arrive every three months Your organization may be more active in the summer months and less in winter There may be end of year costs associated with the preparing of independently examined accounts and annual reports.
The forecast allows your organization to identify and plan for any possible cash flow problems.
Book keeping means recording financial transactions in an orderly and systematic way. Bookkeeping is necessary so that information regarding the financial position of your organization is readily available to the members, trustees and funders.
Bookkeeping should require as few ‘cash books’ as possible. For most refugee community organizations only three...