Many small charitable organizations do not have finance in place. One single individual shares more than one responsibility.
Some charities are dependent on trustees. Some are dependent on volunteers for the required funding. Others are dependent on the staff.
For these charities, it is a complicated aspect to deal with. Sometimes it is not on the top priority as well. But it is crucial to managing finances.
The right way is to equip these charities with the right vision. Also, there should be a direction to manage their financial resources.
Once the resources are managed effectively, it will bring in revenue. For every organization, money forms a crucial part. With no money, an organization cannot proceed.
The financial aspect of charity
Many charitable organizations think of availing of loans from the market. This helps them to finance their expenditures. They can take out installment loans for bad credit from direct lenders only. In the UK, this is a good option for such organizations.
Furthermore, these loans help these organizations to fund their expenses. With no regular income, borrowing is a good option.
Ways to manage finances for charitable organizations
It is difficult for charitable organizations to make their ends meet. As part of these organizations, you can follow the below-mentioned steps. This way, you can improve your finances.
Free of cost information
The best way is to check the central charity website. This website is a pool of resources. These are available for all sizes of charitable organizations.
Further, you can refer to their Money and Accounts section. This section offers free information on accounts and charity reporting. It also offers information on asset, resource management and investments.
Along with this guide, annual report samples are also available free of cost. Moreover, they can be downloaded for reference.
One website for reference is The Small Charities Coalition. It provides information on financial management templates. Further, it provides links to other useful websites as well.
Importance of finance skills
The finance department is an indispensable part of every organization. Charitable organizations are no exception. Every charity needs well-equipped staff with financial knowledge.
There should be sharing of financial responsibility among individuals. These individuals should have different skills and knowledge.
It should not fall upon one person as it can be burdensome and pressurizing. For effective financial management, an individual needs specific charity accounting experience.
Along with this, they should have the skills to manage their finances. They should be able to understand and decode the financial information to take the proper steps.
Training is always helpful in transforming individuals in every field. It is crucial for individuals to hone their financial skills.
There are few government training modules for charity. These cover the financial aspects. You can always refer to these modules and arrange for training. This will enhance the financial knowledge of your people.
The government also provides affordable training and support services. This helps in their betterment and development.
What are the essential finance processes?
Simplicity is the right approach for effective financial management. Accounts maintenance is the basic process to keep the finances intact. Use spreadsheets for charting expenditure versus income or other methods.
Another good way is to create a cash flow forecast to predict bank account movements.
You can also have an effective filing or referencing system. It will help track any document or information at the time of need.
Financial management happens through various processes. It requires controls as well as adequate documentation. This is to manage the use of restricted and unrestricted funds.
You can select from the checklist that will be useful in managing these processes.
The further detailing in processes
In many smaller organizations, a single person manages the finances. Further, that person looks for accounting books and records as well. To reduce the error rate, every person needs to understand the processes.
This requires effective communication. This is to get different ideas from different people on managing things.
Charitable organizations need to include others in bank reconciliations. They should also have people in account management systems.
The duties must be allocated to different people. It will help reduce the error rate in processes. Also, it will help in combating fraud and cheating.
Keep the account simple
Every organization needs clear and simple account management systems. This is regardless of their size and structure. The records should be clear to make the management and trustees comprehend them.
One tip is to form a simple narrative that makes it easy to understand the numbers. If the management is looking at the records, they should be able to understand it. Also, they should be able to answer any questions on the numbers.
You can also use visual representation to make them understand the numbers in a better way. These include pie charts and bar graphs.
It is a must for these organizations to produce their statutory accounts. These accounts represent the current situation and the financial activity.
It is the responsibility of the finance person to file these accounts in advance. They must keep it simple and narrative. Having these reports and accounts intact indicates compliance. It ensures that the charity is compliant with statutory reporting requirements.
Don’t assume it will be easy
The level of financial management does not depend on the size of the charity. It is not necessary that managing the finances for a smaller charity is easier. As compared to a big organization, it may be tedious.
It is a complicated process to manage the finances of smaller charities. Tax is a significant challenge for many organizations.
Many charities end up paying VAT on things they buy. This is regardless of their VAT registration status. VAT and tax can prove to be complicated areas for smaller charities.
Alternatively, you can apply for a loan. This is an easy option to fund your basic expenses. It helps you stay relevant in the market and perform your functions.
To simplify things, charities can opt for outsourcing. This will lead to their cost-effectiveness. They can outsource their payroll to ease off the financial burden. It is important for every organization to know where to look at the time of help and whom to contact.