The Covid-19 pandemic has caused many financial issues for charities. Going back to basics can give a clearer picture of your charity’s financial situation and help you manage your finances effectively.
Know your charity’s overall financial position
It is essential that you understand your charity’s financial position and have a good overall view of the financial health of the organisation. This will reveal any major risks or problems which may need urgent action and enable you to plan accordingly.
Monitor cashflow and create budgets
Frequent monitoring and review will help you manage your finances.
Cashflow forecasts play an extremely important part in successfully responding to and recovering from the Covid-19 crisis. If a charity runs out of cash, it can mean the end for your charity, managing cash flow is vital if it is to continue to operate. Reducing costs and increasing income is vital to improving your charity’s financial position.
Your charity should have a budget and stick to it. Reviewing how much your charity receives and spends against the budget enables you to identify problems quickly and agree a solution.
Keep up to date financial records
It is vital (and a legal requirement) that your charity keeps records to show all the money received and spent by the charity. Records should also be kept of the charity’s assets and liabilities. These records are used to prepare the accounts and trustees should approve them.
Some charities have specific rules in their governing documents on record keeping so it’s important to check and follow them if that is the case.
By law charities must keep accounting records for 6 years for a charity that is not a company or for 3 years for a company charity.
Act fast on financial problems
The pandemic means some charities are having to deal with serious financial issues that will have a huge impact on their activities and those who rely on them.
If you cannot afford to make payments on time or there is a sudden significant change in the amount of money coming into or going out from your charity, it is important to act quickly.
If you think your charity is facing serious financial difficulties, then you should take professional advice as early as possible. Getting early advice means there is more opportunity to carry out a recovery plan or managed closure.
The Charity Commission has issued guidance on managing charity finances.
If you need advice and support with your financial operations, please get in touch with our charities team.
