You may be aware that the not for profit sector is one of the most highly regulated sector. There are complex accounting and financial reporting requirements. This makes it difficult and expensive for charities to comply with the numerous requirements from Charity Commission. Additionally, charities have to keep up with the frequently changing regulations. Consequently, for small charities it becomes increasingly burdensome to run its finance function in house. And due to limited resources, most find it difficult to run their major functions like fundraising and charitable activities.
We have explained at length the importance of accurate bookkeeping elsewhere on our website. You will agree that finance is crucial for the existence and growth of any organisation.
The common problems charities face in relation to finance and accounting are:
- Deciding which type of set up is best suited for an organisation. Whether to set up as a charity, charitable company or CIC?
- Monitoring restricted and unrestricted grants and spending
- Deciding whether you need an audit or independent examination
- Preparing timely management accounts and reports to enable decision making for trustees
- Preparing statutory accounts complying with Statement of Recommended Practices for charities
- Drawing up a sound reserve policy and calculating reserve
- Preparing and monitoring budgets and cash flows
- Identifying trustees’ duties and responsibilities
- Having inefficient and inadequate financial and accounting procedures
- Need for good governance and internal controls