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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.

 The basic principles of bookkeeping, etc. for charities are the same as other businesses. The main difference is the emphasis on restricted and unrestricted funds and the expenditure that goes along with it.

 The point about record-keeping is that you need to keep records that enable the trustees to follow the requirements of the Charities Act, so those requirements are:-.

•  To provide basic information so that you're able to show and explain all of the charity's transactions.
•   You must be able to disclose, at any point in time, with reasonable accuracy, what it says, the financial position of the charity and,
• ·       Basically, the ultimate is for the trustees to be able to prepare a set of accounts.
•  

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.

RECORDING RECORDS

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.

 There's nothing wrong with that, it's just that, as I said, it has a few limits.

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.

             ·       The negative of that is that you will almost definitely need extra training and possibly ongoing support for that,                     and, depending on which package you go for, it can be expensive. There are some free ones. Some of them are a                     bit more limiting. It does depend on what you're looking for.

 That's more about the actual physical ins and outs, transaction side.

 MORE COMPLEX

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.

Fundraising 

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.

SUMMARY 

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 –

•    your normal profit and loss,
•   balance sheet reports, which relate to the type of expenditure.
• ·       you can also get funding reports. (So if the funder actually says, what did you spend my money on, you should hopefully be able to get a specific report saying, here you go, this funder, this is what you gave me. This is what I've spent on.)
•        And then the third type of report, you can get out gives details for projects such as daycare, advice, a charity shop something like that. (So you want to be able to see how profitable, or not, each of those activities are because that helps you make some kind of decision as to whether or not you're going to continue with it and think about, why is it not profitable or why is it profitable or etc.

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.

PROFILE 

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.

 I am a fully qualified Accountant with 34 years of experience, most of which has been in the public/charity sector. I set the business up a year ago because I want to make a difference in the world. I want to make a difference in people's lives. I want to be able to help people understand the accounts, why they need to do the accounts, and how to do them properly or do them for them. If I do them for you, that would hopefully relieve the stress that a lot of people can have the feeling that they're not sure they're doing it right. They're not sure they're hitting deadlines, etc. I'm hoping that it will also free up your time to either spend with your family, do more on your business, do more charitable objects, more of your charitable objectives, etcetera.

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.

 If you want to talk to me, or need to get in touch with me, my email address is [email protected].

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.