Getting a grip on your finances
by Christine Wykes Driver
Photo: Flickr - TaxRebate.org.uk
Here are four crucial steps to good financial management that every small organisation or group needs to put into practice now, if they are going to weather the storm ahead:
1. Finance reports – better late than never
Now that we are into the last quarter of the financial year for most groups, it is time to take a close look at how your finances are working out. If you haven’t been doing this on a regular basis it is definitely time to do it now. Produce some financial reports for your senior staff and trustees so that they can see how well the organisation is doing overall. They will also need to look at your spending against specific restricted grants. You still have a little time for remedial action, so seize the opportunity now and avoid unpleasant surprises at the year end.
2. Budgets – looking at how you are doing
This leads on to budgets. Have you been checking income and expenditure against budget for the past year? How is it going? Are you running out of funding in some areas or do you have a surplus on a restricted grant that needs to be spent by a date that is fast approaching? Do you need to talk to your funders to explain that things haven’t gone as planned? Don’t wait until the deadline for your monitoring report – do it now!
And have you worked out your budget for the next financial year? If not it’s time to get to work and make sure it’s approved by your management committee before the next financial year starts. Don’t forget to create budgets for your different projects or services as well as an overall budget for the organisation.
3. Uncertainty – examining your options
You may be waiting with bated breath to find out the result of a grant application. But have you thought about what you will do if you don’t get the full amount of grant you have requested? Put a plan in place now so that if the worst happens you will be able to take action immediately. Which brings me to …
4. Reserves – if the worst happens
Remember that, for charities, free reserves consist of unrestricted funds. Any surplus of restricted income is already committed and cannot be redirected to other purposes. You need a bare minimum of reserves of unrestricted income set aside for a rainy day. A very rainy day could mean that your charity has to close down and you should have reserves in place to cover the costs of winding up the organisation, paying redundancy and repaying any contract or grant funded projects that you cannot complete.
If all this is new to you, then consider attending one of our introductory courses on managing your organisation's money.
Have a look at our financial management resources.
Christine Wykes Driver is Voluntary Action Lewisham’s Community Accountant, providing development support to organisations around finance and governance issues. You can contact her on firstname.lastname@example.org