The Charity Accountant
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Bookkeeping is sometimes considered as a lesser role than accountancy or perhaps its accountants who just think they are more important. Whichever way around it is the message to take away is that’s wrong.
Bookkeeping is the bedrock of accounts preparation and good reporting. It is very difficult to prepare accounts, reports or balance sheets if you have no information to put in them! Even if you have the smartest, slickest templates for your reports, without accurate, timely bookkeeping there is not much point in having templates at all.
The basics of good bookkeeping are actually very simple. You need to have an electronic system that allows you to easily enter dates, invoice numbers, descriptions etc. another essential tool for your electronic system is data manipulation. Most accounting software packages are specifically targeted at accounts which is perfect if all you want from your software is bookkeeping and reports.
We use excel spreadsheets for a couple of good reasons.
The first is its very cost effective, once you have bought the initial package you have that for as long as you need with no renewal costs (unless you are now on the pay monthly deal offered by Microsoft).
The second reason is just how adaptable excel really is. It can be used to store an unlimited amount of data whilst still providing the tools to quickly and easily dig out the information that you want. Excel is not just useful for finances, you can use it for monitoring numbers of people helped, website visits, contact details the list of uses is almost endless! Some more examples include monitoring key words on your website, monitoring training records and so on.
So, excel is our preferred software of choice for small charities. Once you reach a certain size however you will find specially made accounting software essential for quick bookkeeping. But remember size is not necessarily a measure of expenditure or income but a measure of how many transactions your charity needs to process.
Internal controls and procedures
Another essential tool for bookkeeping is a solid internal controls and procedures policy. There is more information on our website including guidance documents provided by the charity commission. But the key is make sure the procedures are reasonable and that the controls are effective. Internal controls and procedures is such a complex topic that I will dedicate another article to this at a later date.
So far we have only scratched the surface of bookkeeping but there is plenty of time to say everything that needs to be said! Stay tuned.
ACCOUNTANTS VS VOLUNTEERS
This is the first blog of many to come from The Charity Accountant (Ben Stephens owner of Chadmin). There are many topics to cover from fund accounting to bookkeeping to independent examinations. I may also stray into topics such as fundraising and administration but everything on this blog will be focused on charities. All these topics and more will be discussed overtime but for the first blog I want to talk about why so many charities still rely on volunteers for their accountancy needs.
1. The number one reason is of course it’s free which sounds perfect and makes charities feel like they are saving money.
The trouble with free accounting services or free bookkeeping is that there is normally a lack of professional knowledge. This can regularly become more of a hindrance for charities than a benefit. Most accountants will always do their best to save money for their clients (charities or businesses) and this is something that a volunteer would not necessarily have the skills to do. Of course if your volunteer who does the accounts happens to be a qualified accountant then you are very lucky!
2. Accountants are often not trusted as we are occasionally perceived as money grubbing monsters!
This is true for some accounting firms who unfortunately care about money more than people. But there are plenty of practices around who genuinely care about making a difference to the world. They can be difficult to find but when you do find one that works well with your charity make sure you keep them. Whilst we are on the subject of charity accountants don’t forget to check out my website Chadmin For Charities.
3. The transition can be difficult going from volunteer to paid accountant.
If you have had a volunteer who has done the accounts for years but the charity has grown beyond their capabilities it can be difficult to say we need to get an accountant now. But it is very important that you do! Otherwise you could end up on the wrong side of the law simply by trying to keep costs low and not wanting to lose a committed volunteer. If you are respectful of the work the volunteer has put in and include them in some other way, perhaps get them to work with the accountant, then you can have the best of both worlds.
4. Trustees think an accountant is not necessary.
This can happen easier than you might think. Trustees get used to the volunteer doing the accounts and as the charity grows and expands probably forget or do not realise that they are asking too much of their volunteer. Communication is essential between trustees and volunteers to ensure volunteers are not being given responsibilities they are not qualified for. Obviously in the first year or so of starting up your charity there is probably no need to be paying for an accountant. As you start to grow your accounts will inevitably get more complicated. (Keep reading my blogs to see what I mean by complicated!)
5. Worst case scenario is that the people running the charity think reporting and keeping accurate accounts is not necessary.
I personally have not come across any situations like this yet but there are bound to be people who think like this for one reason or another. Even if you hate all the endless amounts of reporting it is essential that you don’t ignore it or make it less of a priority. The reason reporting is so essential is to ensure charities are legitimate and not committing fraud or being used as fronts for organised crime. If your sat there thinking “well my charity is clearly legitimate” think on this. How are the Charity Commission or HMRC meant to prevent charities being used for fraud or fronts for organised crime without some kind of information exchange?
Thanks for reading and stay tuned for the next topic I cover! I will be posting a new blog at least twice a week. Perhaps even more if there is something really exciting going on in the world of charity accountancy!