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Record keeping and accounting

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The basic principles of bookkeeping are the same for charities as for other organisations, you just need to be aware of the slightly different emphasis and the need to keep restricted funds separate.

Accounting records

You need to make sure that your accounting records enable the trustees to meet the requirements of the Charities Act.

  • Provide the basic information to show and explain all the charity's transactions
  • Disclose at any time, with reasonable accuracy, the financial position of the charity at that time
  • Enable the trustees to prepare accounts that comply with accounting regulations

and contain entries showing:

  • all sums of money received and spent by the charity, date and the nature of those transactions
  • a record of the assets and liabilities of the charity.

How you do that will depend on your size and complexity and who will be doing the bookkeeping. Here are the pros and cons of different methods:

Manual Only for very small organisations

+ Anyone can do it
- Slow and error-prone

Spreadsheet Relatively straightforward organisations with a few projects/funds

+ intuitive; many people know how to use spreadsheets
+ cheap; most organisations have a spreadsheet package

- can be difficult to flex as organisation grows
- may be prone to error if appropriate checks not built in
- not good for integrating invoicing and accruals accounting

Accounts package (cloud or desktop) Relatively larger or more complex organisations

+ designed to cope with accounting information
+ standard reporting built in
+ good for invoicing

- not intuitive, additional support and training required
- level of expense involved
- no low cost 'industry standard'- tweak for fund accounting

If you want to use a spreadsheet, you probably don’t need to start from scratch, a number of community accountants and other charities have free templates you can download and adapt. If you don’t have a local community accountancy service, try one of the cashbooks from WYCAS (they have a range that go up to eight bank accounts and 25 funds)

WYCAS also have good introductory advice on Sage and Quickbooks aimed at small voluntary organisations. 

Other evidence you need to keep

Don’t forget that your accounting records also include all the evidence from outside the organisation about why you’ve paid or received money – you should have a document (real or virtual) to support every transaction in your accounts, including things like

For receipts:

  • Grants – confirmation letter with grant details, plus grant conditions. Remittance advices for each grant payment
  • Room hire/lettings – copy of your invoice plus evidence of receipt of payment
  • Donations – accompanying letter/email
  • Cash from events – Cash sheets properly signed off

For payments:

  • Invoices (addressed to the organisation), clearly showing goods or services supplied
  • Shop receipts for smaller items - properly authorised with explanation of goods/services purchased
  • Volunteer expenses – claim form with travel tickets, food receipts etc, showing reimbursement of actual expense not round sum payments
  • Travel expenses – travel tickets, or details of mileage with explanation of purpose of journey

Chart of accounts – how to structure your cost headings

You need to work out how to break down all your income and expenditure into headings like Membership Subscriptions, Ticket Sales, Staff Costs, Publicity – and this set of headings is called your chart of accounts.

The best place to start is with who you are going to be reporting to and what they need to know – don’t guess but talk to them and get them involved if they are your colleagues or trustees.  Make sure you involve fundraisers (and keep communicating with them) so that reporting to donors is a smooth process. 

You don’t want too many headings because that makes any report unwieldy – so make sure you understand why people are asking for particular analysis, eg breaking vehicle costs into fuel, maintenance and insurance – a good question to ask is ’what decision would that help us make?’

Further guidance

These articles are useful guidance if you are looking to change your chart of accounts and need to prepare SORP (Statements of Recommended Practice) compliant accruals accounts:

Mango/Humentum offers good advice but be aware that this is for international NGOs so you need to ensure that anything that you create takes UK reporting requirements into account.

Page last edited Jul 19, 2018

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