FINANCIAL FAQS FOR CHARITIES
Released On 20th May 2022
Running a charity is an extremely rewarding role but comes with a host of responsibilities.
Ultimately, it is up to the board members and trustees to ensure the organisation is well run, complies with legal and tax obligations and is financially healthy so it can continue to help the people and projects it was set up to support.
That is why it is crucial for charities to have accountants on their side who understand the complexities and difficulties of the charity sector.
If you are involved in the leadership of a charity, what questions should you be thinking about and what should you be asking your accountant?
How can an accountant help my charity?
You would be surprised by the breadth of work accountants can carry out for charities.
The list is exhaustive and includes work such as internal audits, VAT legislation and planning, risk assessments, funding bids and corporate governance. Don’t forget the day-to-day operations too. Having the support of an accountancy firm is simply a must for any charity that wants to not only survive but thrive.
What financial information do I need to collect?
Every charity must keep accounting records, even if it is not registered with the Charity Commission, and also conduct annual accounts. All charities must also create a trustees’ annual report which details the charity’s work for the year and helps demonstrate their work to the public and funding bodies.
However, reporting requirements change as charities grow, which all trustees and leaders must be aware of.
My charity only has an annual income of £20,000, what reporting requirements do I need to meet?
All charities with an annual income above £5,000 are legally bound to register with the Charity Commission. All registered charities must produce a trustees’ annual report.
Meanwhile, charities with an annual income above £10,000 need to submit an annual return to the Charity Commission. This must be sent within ten months of the end of the relevant financial year and should include details from the annual accounts and trustees’ annual report.
My charity has grown in recent years, and we expect the turnover to soon reach £100,000. Does this change how we need to report our finances?
Charities with a gross annual income between £25,000 and £250,000 need to have their annual accounts independently audited, which forms part of the annual return.
Why is it important for my accountant to know my full cash position?
As the leader of a charity, it is vital that you know how much cash the charity has in the bank and how long it will last. This means having a clear picture of your cash flow. Your accountant will want a cash flow forecast in order to be able to advise you on any remedial action you may need to take so make sure you have all the information at hand and up to date.
This will also provide a clear picture of any assets the charity holds that are restricted, for example for capital projects. This will help your accountant understand how much available cash there is to spend on charity projects and overheads.
What questions do I need to ask my accountant to understand what is on the horizon?
Does your charity have any big financial events coming up, such as rent due or a large payroll commitment? What actions need to be taken now so you can plan ahead? Make sure you have these events mapped out so that you are not hit with a nasty surprise in the shape of an unexpected bill.
How can I make sure our charity will have the financial resources to meet our long-term vision?
Ultimately, where do the trustees and leaders see the organisation in five or ten years from now? Your accountant can help you budget and plan for long term and large-scale projects, so you can make your goals a reality. Your accountant is not just there to offer a finance function, they can also help create a genuine and lasting value to your charity.
What can I do to improve the running of my charity?
Don’t stop asking questions! By being questioning and inquisitive, you can help safeguard the finances of your charity. Your accountant is on hand each step of the way and we can also provide answers to questions you may not have thought to ask. Our overall aim is to ensure your charity is in good finance health, so that it can continue to make a positive impact on the communities and individuals you serve.
