Disclaimer: The information provided in this section is intended for guidance only. It is not a substitute for professional advice and we cannot accept any responsibility for loss occasioned as a result of any person acting or refraining from acting upon it.
If your group has started to raise funds then it is important that you understand your accountability for this money and are able to show how it has been used. In order to do this you must have basic financial controls and a basic level of bookkeeping, to show exactly how your money has been spent.
Each transaction must be backed up by receipts and it should be clear what the money was used for.
You will need to decide procedures and financial controls:
- Do you need a bank account?
- If you have a bank account, how many signatories will you have and who will be signatories?
- How many signatories will be required to authorise a payment?
- How will you maintain accurate accounts records and reconcile with bank statements?
- Do you need a petty cash float?
- How will the money be kept secure?
- Who will authorise cash payments?
- How will you maintain accurate records of petty cash?
- What will be your procedure for reconciling the petty cash float?
It may be useful to write a Finance Policy so that your procedures are clear.
It is useful to write a short summary of the accounts at the end of your financial year. This will also help your group to know how you are doing financially at points during the year, and to make informed decisions on future budgeting and fundraising activities. This does not need to be complex, or even too time consuming if you are not hugely active financially. It is merely a way to show that you are using the money as you said you would, and responsibly.
If you have a turnover of more than £5000 a year then you have to register with the Charity Commission, which in turn means you are required to produce a yearly annual report.
Good practice guides from WYCAS on accounting, financial controls and governance
The Southampton City Council has written a great resource on starting up a small community group, and although this is more comprehensive than just finance you can jump to different parts of the document via links in the top menu. This looks at bank accounts, insurance, accounting, bookkeeping, the role of the treasurer and more.
WYCAS has a range of accounting tools including cashbook templates (useful if you need to keep track of different funds).
The Resource Centre has created a simple accounts system for small groups which you can use to keep track of your incomings and outgoings (useful if you do not need to keep track of different funds).
Community Accounting provides templates for your end of year accounts summary which you can then edit to fit your group.
The Blyth Valley CVA has produced a short overview of basic financial controls for small community groups.
There is also info on the preparation of these reports on the Charity Commission website.
Groups may wish to open a bank account if they want to do activities that require a lot of funding. This is not essential, and if groups can find a charity who is willing to hold their money and accounts for them, they can keep hold their money elsewhere. However, in terms of groups doing their own bookkeeping and being aware of the funds they have, as well as for funding bids, it can prove beneficial.
You are allowed to have an income of anything upto £5000 a year before you have to register as a charity with the Charity Commission. Anything over this and you have legally have to register. For more information on this, please visit our Governance section.
Making the process easier
Opening a bank account is something that a lot of our groups have found to be quite tricky.
Although legally 50% of your trustees can be asylum seekers, groups have found that this can cause to a lot of time being wasted and difficult questions when trying to open an account.
To make the process easier we recommend starting with the minimum number of trustees, 3 (Chair, Secretary and Treasurer) and having those all as British Citizens. Then, once the account has been opened, you can later change your trustees with the consensus of your voting members, at an AGM or other official voting meeting.
What type of account should we open and with which bank?
When looking into where to open an account, for small groups it is worth looking into Community Accounts. These can be found with most major high street banks in the UK, and for more information please read this useful page.
We bank with the Co-operative, and you can find an article on the ethics of the Coop since it was bailed out here.
It is also worth looking at Credit Unions financial co-operatives which are owned and controlled by the members, and you can find your nearest one here.
Your group may keep a petty cash float for events and expenses. It is advisable to keep the use of cash to a minimum and it is crucial that your float is kept in a secure place.
You will need to keep an accurate ‘petty cash book’ where each transaction is recorded. This should be backed up by receipts.
You will also need a procedure for reconciling your petty cash book where you will count the cash you have and check it is the amount you were expecting based on the receipts that you have. Any petty cash count should be checked by a second person.
Sometimes you may need to issue an invoice, for example if you’ve done an awareness raising talk for an organisation and they have agreed to give you a donation. You can use this template. to input the information needed and then send to them for payment.
It is a good idea to keep a spreadsheet of all your invoices so that you can keep a record on when the invoices were sent, and when you received payment, so that if you do not receive payment you know when to chase people up.
For bigger organisations, you may need a Purchase Order Number to add to your invoice but the organisation will usually let you know beforehand. A Purchase Order number is their reference that the payment has been agreed through their own approval channels.
Usually your constitution will include the requirement that you produce annual accounts. If you are registered as a charity or CIO, you need to submit your annual accounts in a particular format within 10 months of the end of your financial year.
If your income is over £25,000 but less than £250,000, you need to arrange an independent examination of your accounts.
Guidance from the Charity Commission for groups in England and Wales
Detailed guidance from the Charity Commission on charity reporting and accounting
Insurance is something that you may wish to consider if you will be holding events - in case anything happens, such as damage to the event space or an accident at the event.
The most likely type of insurance you would want to get it “Public Liability” insurance. Here is the Resource Centre’s page which explains a bit more about this.
If your group has trustees, you may wish to get “Trustee Liability” insurance, which removes some of the risks of being a trustee that are discussed in the Governance section.
The Small Charities Coalition has compiled a list of many different guides on insurance and risk assessment.
KnowHow NonProfit’s page on insurance and volunteers.
An incredibly thorough and comprehensive document from the NCVO detailing on every type of insurance a small charity or nonprofit may wish to consider.
Some information on CaSE insurance, the recognised partner insurer to the NCVO, specialising in charities, faith groups and social enterprises.
A list of suppliers from the Resource Centre, some of whom are specific to South East England.