In this and subsequent articles, I will simplify and
demystify accounting terms and processes.
Today I want to talk about charity, record-keeping, and
accounting.
On top of that. The entries need to be able to show all of
the sums, in and out, date, amount, what it is for, etc., and you also need to
be able to record the assets and liabilities of the charity.
Like any business, there are a number of ways that you can
use to record your bookkeeping records, and it mostly depends on the size of
the organization.
·
So, for instance, you can be completely manual. You literally record in and outs. Obviously, that would be
if you are particularly small, not a lot of transactions, etcetera.
o
The pro of that is, it's really easy to do.
o
The con, is that it can be
quite slow and is open to errors.
·
The next level up is spreadsheets. If you
know how to use a basic spreadsheet, then it's relatively straightforward. You can
set it up so it will work out your calculations for you, add up columns, etc.,
so there's a little bit less human error in there and it can be cheap.
o
The main difficulty there, for charities anyway,
is they have restricted funds. It is a bit difficult, once you start getting a
bit bigger, to be able to adapt your spreadsheet when you're trying to start
putting in which funders, have which expenditures, and try to keep a record of
the projects or each of the different funders, etc.
o
Not only do you want the category, but you want
the funding, you want the project, etc. So it gets a little bit more awkward.
o
It's still prone to errors because there's a lot
more human interaction with it and what it doesn't do is, the invoicing and the
accruals, etc that are actually separate from your transactions. It really is
just your cash and bank movements that you usually record on the spreadsheet.
ACCOUNTING SOFTWARE
In the next stage, as you get a bit bigger and you get a bit
more complex, you'll probably want to look for accounting software and there
are lots of packages out there.
You can have the software on one desktop or you can use it
on the cloud. If it is cloud-based, it is a lot easier for different authorised
people, to be able to see the records as and when they require them and you can
share them with your accountants easier.
·
Accounting software packages are set up
specifically to understand the accounting rules and how to use that
information. There are very standard reports usually built into most of them and
most of them integrate your sales invoicing into the whole package so you can
keep a record of who owes you and who's already paid, etc.
There's more to your charity records than that. You need to make sure that you keep all the evidence for the transactions.
So, for your
receipts, for example,
·
you've got grants,
o
you need to keep your confirmation letter,
o
what the grant conditions are,
o
remittances of what you've received.
·
If you do room hire,
o
you need to be able to keep a copy of the
invoice that you've sent out,
o
evidence that the money has been received,
· Donations.
Some of this depends on what depth you're going to. In particular, if you're going to be claiming gift aid back, you need all your gifted declaration forms, all signed, etc.
Most donations, if nothing else, will come with some kind of email confirmation saying I'm sending you this and, you know, thank you or whatever.
If you are holding fundraising and you're actually using
cash, you need to make sure that you control that correctly.
·
It's counted by at least two people,
·
They sign it off. So you're backing each other
up,
· You've got cash sheets proving that there are so many of
each coinage or notes, and it comes up to the total with what's actually left in the
box or pouch.
On your payment side, similar thing.
·
You need to make sure you keep all your invoices
from your suppliers,
·
you need to keep even your small receipts from
shops or, if its market stalls, handwritten receipts,
o
something that's properly authorized,
o
showing you, what you bought, how much you've
spent, where you've spent it, and what you've spent it on.
·
Volunteers expenses –
o
you need to keep all the claim forms,
o
they should have receipts attached if reclaiming something that they bought for the organisation,
·
you need to make sure you keep those receipts
and the forms
· Make sure they are all properly signed by someone properly authorised to allow the expenditure type and level.
·
When the person gets the money, they sign as proof of receipt.
· Travel expenses.
If there's a ticket involved, obviously that needs to be
kept. If it's to do with the number of miles, they're claiming so much per mile,
they need to record where they've been, and how many miles for each journey. It's
all about making sure you've got all the backing information that you can prove
someone else is claiming it from you, and they can prove that they're claiming
the right amount, but also you can prove,
one, that they've got the money
and
two, what it was spent on, etcetera.
So that is the record
keeping. It is not just about keeping the ins and outs. It's about making sure
you've got all the paperwork and things behind it. And that's very basic. But the
main difference with the charities is the fact that if it's an expenditure, for
example, you get a grant and it's specifically for something like a daycare centre,
then you need to mark whatever expenditure is specifically for the daycare.
You need to be able to record not only is it whatever kind
of expenditure, such as rent, stationery, or whatever, but you need to be able
to record that it was spent out of a specific fund. And possibly, because you
want to know how profitable, or not, each kind of different project was, you
might also want to record which project it relates to.
This will mean, at some point, you can get –
It It helps you make decisions on each of the different kinds of projects that are there.
I hope that has been good for some kind of introduction to charity recordkeeping.
My name is Moragh Hunt. I run Northwest Numbers CIC and
we provide bookkeeping and accountancy services, payroll, budgeting, and forecasts
for small charities, not-for-profit, start-ups, and businesses.
By getting into the kind
of public sector, the charity sector, and not-for-profit, I hope I can make a
difference in people's lives because I'm making a difference in your life and
then you're making a difference in other people's lives. So it's a win-win
because I love numbers, people, and making a difference.
I have a Facebook page - North West Numbers, I am visible on
LinkedIn, Instagram, and Twitter and I also have a webpage
www.northwestnumbersltd.co.uk.
Please book a free, 30-minute, no hard-sell chat with me at https://calendly.com/nwnumbers/virtual_coffee
I can also be found through
my Facebook or send me an email and we will organise some kind of Zoom call so
that we can discuss what kind of problems you're having, and how I can help.
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