QuickBooks Set Up

Set up QuickBooks Online using templates

When you are in the process of setting up QuickBooks Online you can save a lot of time by using the templates for importing information. Once you have input your charities details here are the three tasks you should do before you can get going with bookkeeping.

Firstly, you will need to set up your chart of accounts. You can use this template to import if you already have a chart of accounts you would like to use. If you are our client use this simplified income and expenditure template instead.

You will then need to set up your class and project lists if you want to track your grant under and overspends. We strongly recommend that you use this QBO feature. If set up and used correctly, it will help generate fund tracking reports showing how much you have received and spent on any particular grant. You can see an example of the class lists here.

The final step is to import all the supplier and customer/donor information. If you already have the data saved on your current software you can export it to a csv file and use QBO templates to import this information. It not you can manually input data in the template and then import. Either way, you will spend less time this way than manually entering data on QBO. Here is a template you can use to import the suppliers and customers lists.

That’s it! Now you are ready to go.

Start inputting your bills and invoices directly onto QBO if you are starting at the beginning of your financial year. If it’s part way through the year and you don’t want to be doing the data entry again QBO allows you to import your invoice and bills too! Here is a template that you can use to import all your sales invoices and purchase bills.

Finally, it is worth mentioning that you can import all bank transactions using a csv file which you can download from your bank. I don’t remember the last time I manually posted a supplier payment or customer receipt on QBO. Why not use this function to get rid of the mundane task of data entry? To be a step ahead, why not connect QBO to your bank to automate bank feeds coming in so you don’t even need to manually import transactions?!

We can help with the whole end to end process of setting up your charity on QBO so you have peace of mind that the information generated from QBO will be readily available and reliable. We also offer basic 2 hour QBO training.

Charity Trustee

Charity Trustees

Every charity has the ability to develop a strong board by recruiting charity trustees that are right for the role. Whether it is a professional or layperson, the role comes with significant responsibilities. This means that the trustee you appoint must be reliable, trustworthy and committed. It is very important that the trustee board is well balanced with a mixture of skills and expertise. Fundraising, finance, legal, marketing sectors are some examples . It is therefore advisable to have a regular trustee skills audit. This will identify areas of lack of expertise which will in turn help recruit new trustees with those required skills.

What makes you a good trustee?

As a good trustee, you have to be someone who fits into the ethos of your charity. You have to be able to understand what the aims of the charity are and where it wants to go.

An essential quality of a trustee is to be able to use your expertise for the charity’s benefit. You should be able to guide staff and use your professional experience. If you are a lawyer by profession you should be expected to guide the charity with legal issues.

Being a trustee is a serious commitment. No matter how good a trustee is, but if they are not able to attend meetings regularly and give up their time to prepare for these meetings they are not going to be of much use to the charity.  Recruit a trustee not only because of their status in the community, but also because they have time for your charity.

Trustees have a responsibility of taking decision. These are mostly good decision, for example, expansion of the charity but sometime bad, for example, closing the charity. As a responsible board comprised of good trustee, you should be able to make these decisions with prudence.

A person should be legally eligible to act as a trustee. You should be above the minimum age (at least 16 years)and a fit and proper person. Additionally,  you should not be disqualified of acting as a Trustee by Charity Commission. In certain cases, safeguarding and DBS checks will also have to be carried out.

What are your responsibilities as a trustee?

As a good trustee, you need to take your responsibilities very seriously. You must protect the interest of the charity at all times. Because, if you do not act with reasonable care, you can be personally liable for the damages to the charity.

Charitable purpose and public benefit

As a charity trustee, you must continually assess the charities activities to ensure it continues to attain the purpose for which it was set up. All charitable purposes must provide benefit to the public and so all activities should provide public benefit too. When embarking on expansion of provision of service the trustees need to ask whether these are within the objects of the charity.  Not only that, you need to ask whether the new services provide public benefit to the beneficiaries identified in the charity’s aims.

Compliance with charity’s governing document and charity law

The last this you want to do is to be on the wrong side of the law. Acting voluntarily and without remuneration does not mean that you will not be personally liable if things go wrong. And if you do not exercise reasonable care and skill in making decisions things can easily go wrong.

You need to ensure that not only the charity but also its staff and co-trustees abide by the law, most importantly, charity’s governing document. All provisions of the governing document are as important as the Charities Act and requirements stipulated by Charity Commission. You must prepare a Trustees Report annually which complies with Charity Law. Here is more information on what to include in your trustees report. Any actions ultra-virus the governing document cannot be ratified by the trustees subsequently.

Similarly, ignorance of the law is not excusable. So as trustee, one of your primary obligation is to take reasonable care in identifying what legal requirements does your charity and you need to comply with. Among other things, care should be taken to comply with requirement of appointment of trustees, audit and accounts, transactions with related parties, trustee’s remuneration etc.

Act in your charity’s best interest

To be able to make decision and act in the charity’s best interest you need to be an independent trustee without any direct or indirect interest in the charity. Meaning, your personal interest should not be in conflict with that of the charity. In other words, your personal benefit should not be influencing your decisions about the charity. Therefore, neither you or any of your relative or connected persons or organisation should be a direct beneficiary of the charity.

Even though, you may not have any conflict of interest with the charity, you should take decisions that are in the best interest of the charity. The decisions should be rational that any reasonable person should be able to take.

Manage charity’s resources responsibly

The trustees have a fiduciary duty to protect the assets of the charity. As trustee, you should ensure that the charities assets and resources are not only used solely for charitable purposes but also put appropriate safeguards in place to avoid abuse. The trustees cannot always be involved in the day to day activities of the charity, but they need to have procedures in place which protects the charity. Reckless spending and investing can have a detrimental effect to the finances of the charity. Moreover, charity funds should be spent on for the project and activities for which they have been received.

Act with reasonable care

In the event of a claim against the charity or losses suffered by it, if the trustees can demonstrate that they took all reasonable care possible to act in the best interest of the charity they may not be held liable for negligence.  It is, therefore, extremely necessary for trustees to exercise reasonable care and skill in whatever they do regarding the charity. For this reason, as trustee, you need to take the time to understand the charity, its finances, aims and circumstances before making important decisions.

With a view to help small charities Charity Commission has listed 6 main duties that are essential for a trustee.

What questions should a trustee ask at a board meeting?

When you as a trustee attend a board meeting, you are expected to play an active role. If you are just rubber stamping the proposals and decisions taken by staff, then you are being complacent. You are expected to review the proposals and assess the pros and cons, ask questions and then make up your own mind. There will be times when you do have the expertise to decide in which case you should consider obtaining external professional advice.

As a new trustee you should ask to have a copy of the governing document. This will provide you with an insight into the rules that govern the charity. It stipulates how the charity should be run and how the meetings should be conducted.

Money is always an important part of any charity and so, trustees should ask where the money is going and how will the projects be funded. While they might have been told about the exciting work that the charity is doing, often the finance side of running a charity can get overlooked. You should ask for budgets and forecasts along with management  to be presented at regular intervals.

Finally, trustees need to be clear about their priorities and one of the main priorities are the beneficiaries. The charity may have been set up to support, people, animals or groups and so, you should ask about how the actions of the charity benefit the beneficiary and public.

How to find new trustees

The most common way to find new trustees is to ask around. Most often than not a trustee will know someone who may have the expertise and willingness to come on board. Advertising on charity’s website and informing of the vacancy to charities contacts can often yield good results. It is very common to approach reputed members of the community to join the board.

It you however want to go beyond the community you can always advertise in local newspapers or online. Most charities can get a discounted rate.

You can also find some online trustee matching services that charities can use for free. 

What to include in your trustees’ report?

Are you are a trustee or CEO of a small charity? Have you been assigned (if you volunteered, you are a rare breed!) the daunting task of preparing the Trustees’ Annual Report? It is close to the deadline and the accountant is chasing for a trustees’ report. Have you no clue of what to include in your charity’s trustees’ report? Or are you one of the charities in the 30% margin that, according to Charity Commission’s report, do not meet the basic quality benchmark for their accounts and report? Fret not, Charity Accountant have this simple easy to understand guide on what to include.

What to include really depends on the income and nature of activities of your charity. Larger charities (ie with income over £1mn or assets over £3.26mn) have a whole lot more to report on, than small charities. We have broken down information you need to add in your report into 8 headings. Below is information which you should include in your trustees’ report if your charity’s income is below £500,000.

REFERENCE AND ADMINISTRATIVE DETAILS

  • Include the name of the charity and any other name by which it is known.
  • Charity registration number and if applicable, company registration number.
  • Address of principal office and registered office.
  • Names of trustees in the period and at the report approval date. So, all appointments and resignations since the start of the accounting year to the actual date of signing the accounts will have to be included along with such dates.

 

STRUCTURE, GOVERNANCE AND MANAGEMENT

  • Add the nature of governing document ie rules, trust deed, memorandum and articles etc.
  • What is your charity’s legal structure? ie charitable company, Charitable Incorporated Organisation etc
  • Methods used to recruit and appoint new trustees, including any constitutional provisions for appointment.

 

OBJECTIVES AND ACTIVITIES

  • Purposes of the charity. Look at your governing document, rules, constitution or memorandum of association to find what your charities purpose is.
  • Main activities undertaken in relation to those purposes. Explain activities, projects or services as identified in the accounts. Where practicable numerical information on resources spent on particular activities consistent with accounts analysis.

 

PUBLIC BENEFIT

  • Explain how main activities undertaken to further the charity’s purposes for the public benefit
  • Confirm whether or not the trustees have had regard to Charity Commission’s guidance on public benefit.

 

ACHIEVEMENTS AND PERFORMANCE

  • Give a summary of your charity’s main achievements. This is where you can tell your story, and no one can stop you. Write passionately about what your charity has achieved and how it has changed the lives of so many like it was set out to do. Tell the funder, tell Charity Commission, tell the prospective service user the impact your charity has had in the community. Give that funder a reason they cannot say no to.

 

FINANCIAL REVIEW

  • Write a short review of your charity’s financial position at the end of the year. You can compare the annual income and expenditure figures against the same for last year. Then explain why you think the income and expenditure were up or down as compared to last year.
  • You can also add year end restricted and general fund balances here explaining the reason for these balances. Trustees and funders like to know this information because it gives them an idea as to how much free reserves the charity has at its disposal.
  • You must explain the circumstances due to which any fund is materially in deficit (ie overspend) and steps being taken to eliminate it. You could, for example, say that the overspend was due to a late grant installment not received before year end. Alternatively, you could say that the project expenditure was higher than budgeted due to unavoidable circumstances and that the deficit will be made good by a transfer from general fund.

 

RESERVES POLICY

  • Trustees should include a reserve policy in their report. But in order to do this, they first need to draft a reserves policy. Guidance on how to set reserves policy for your charity can be found on Charity Commission’s website.
  • The reserves policy should state the amount of reserves at the year end. It should also explain the reason for holding this amount in reserves.
  • If trustees have decided that holding reserves is unnecessary, then this fact as well as the reasons should be disclosed.

 

GOING CONCERN

  • Provide explanation of any uncertainties about the charity continuing as a going concern.

It is a relatively well-known fact that it is the trustee’s collective responsibility to review the charities going concern ability on a regular basis. But the fact that trustees have to review the charity’s ability of continuing for the next twelve months from the date of the review is not very well known. Most charities prepared budgets for the year ahead. But as you are half way through that year, how many charities extend that budget to cover the next six months? The answer is, from our experience, not many. They will wait till they are in the last three months of that budget before starting the budget for next year.

If your charity is doing this, it could be a dangerous and unnecessary financial risk. If there are issues you may not realise that you are in muddy waters until you are in month 6-12 of the budget. Which will be too late to put any corrective measures in place.

I totally understand that in the current climate it is nearly impossible to predict whether your charity will be a going concern. Nevertheless, trustees are still responsible to identify any issues and take reasonable step in reasonable time.

 

Disclaimer: The above list is not exhaustive but includes the most common information to include in the trustees’ report. For full details and requirements to comply with Charity Law you should ask your accountant or refer to Charity Commission guidance. Alternatively get in touch with Charity Accountant and we will be more than happy to help you.

Charity cloud accounting software

5 reasons why your charity should move to a cloud accounting software

With a lot of balls in the air, the last thing charities want to think about is changing to a cloud-based accounting software aka online accounting software. It is easy to just carry on using the same system that has been used the year before. A minority of the charities may still be okay with this. But for most of those other small charities it is time to pause…… and think……

  • Is your age-old accounting software fit for purpose anymore?
  • Can you generate accurate reports and information that you need?
  • Does it take up a lot of your staff time which could be used more productively somewhere else?
  • Does it tell you how much money you have left in each project pot at any given time?
  • At year end, does it give your accountants the information they need to produce your accounts?

If the answers to these questions are ‘no’ then its time for your charity to embrace the cloud!

If you haven’t already heard about ‘the cloud’ let me tell you what it means. In simple terms, cloud computing means storing and accessing data or software over the internet instead of your computer’s hard drive. A cloud-based accounting software is a software which sits in the cloud and you login to your software through internet just like you do with emails. As its a software that you can only access over the internet, it is also know as online accounting software.

If I have not convinced you already, here are 5 reasons why your charity should seriously consider moving to cloud-based accounting system.

Time saving

You would not imagine how many of our clients have said that cloud accounting software has changed their work life! They have more time to focus on the impact of the charity in the community.

  • Connecting with bank reduces manual data entry
  • Create and email invoices from the software straight away
  • Automated invoices due reminders to customers gets you paid faster and means that you no longer need to chase them up for payment
  • Repetitive transactions can be memorised and automatically posted

These are only a handful of features. But there are many more that are waiting to save you time.

Cheaper that you think

Cloud bookkeeping software are normally available on a monthly subscription which range from £7 per month to £35 based on the package you choose. Most software providers offer discounts and online support to charities. Some accountants use the software themselves and if they are ProAdvisors like we are, they get 15% – 60% discount which we are happy to pass on to our clients! The average price therefore comes to around £10 -£20 per month which is not a barrier for most charities. Especially, given the advantages.

Ready to use information

You are ready to go once all the bookkeeping is done! If set up correctly, a could based accounting software can give you the most accurate information at any given point in time with a few clicks. That financial monitoring report you need to send to the funder can be generated easily. Also, that project income and expenditure summary you need to send to the project manager can be emailed straight from the software. Not only that, you can automatically generate and email that budget v actuals report at the end of each month to the trustees.

Access from anywhere and multiple users

One of the best things about cloud bookkeeping software is that it can be accessed from anywhere. You do not have to be at the desk at that one computer that has a desktop version installed! Your bookkeeper can work remotely and once the work is done you can review the information and reports with your own user login. You might also want to grant limited access to your treasurer you can see the reports from the comfort of their home.

Reduce admin and paperwork

With a host of communications possible through the cloud accounting software evidently there is a reduction is admin and paperwork. You don’t need to print all those invoice and reports. Employee expense claims can also be processed online. Bills and receipts can be attached to expenses and transactions making it unnecessary to print all those supplier invoices. What about authorising purchase invoices and expense claims you may ask? Well, that too can be done online with some software giving the option for an invoice or expense claim to be authorised before payment is released.

So, if you think, your old accounting system is not doing its job and would like our help and advice with choosing a right software for you give us a call! We are here to help! With Making Tax Digital coming up it want be long before you will need one.

I have been an accountant all my life and I cannot find one argument against having a cloud-based accounting software. Well, that’s not true! There is one. You cannot use the cloud if internet is down.

Jargon busters

Here is some notorious and meaningless jargon you will come across in charity accounts that have been explained in simple and meaningful words. For answers to some most commonly asked questions visit out FAQ page.

Accruals accounts

record the income and expenditure of the charity and the increase or reduction in its assets and liabilities. All income and expenditure relating to the accounting year must be taken into account irrespective of the date of payment or receipt. Therefore, accruals accounts are compiled on a ‘true and fair’ basis in accordance with accounting standards and the SORP.

Balance sheet

is a statement of the assets, liabilities and funds of the charity at the end of the reporting period (accounting period).

Community interest company

is a limited company which operates as a business providing community benefit.

Deferred income

consists of resources received by a charity that do not meet the criteria for recognition as income in the statement of financial activities (SoFA) because entitlement to the income does not exist at the balance sheet date.  Therefore, deferred income is not recognized in the SoFA until the charity is entitled to the income. Instead, deferred income is disclosed as a liability in the balance sheet.

Designated fund

is a portion of the unrestricted funds of the reporting charity that has been set aside for a particular purpose by the trustees. For example, the value of functional fixed assets used to further the charity’s aims may be identified as a separate designated fund. Designated funds continue to count as part of the unrestricted funds of the charity, but the trustees may choose to exclude designated funds from the calculation of the charity’s reserves.

Endowment funds

are resources received by the charity that represent capital. A feature of endowment funds is that charity law requires the trustees to invest it or to retain and use it for the charity’s purposes. Hence, the term endowment applies to permanent endowment, where the trustees have no power to convert it into income and apply it, and to expendable endowment where the trustees do have this power.

Funds

is a legal term for the money and other assets held on trust. A fund may be unrestricted and available to apply or spend on any of the purposes of the charity or it may be restricted to a specified purpose or purposes.
Restricted funds may be either endowment or restricted income funds, depending on
the nature of the restriction. Where the fund is not endowment and is held on trust for
spending on specific purposes, it is known as a restricted income fund. Each fund is a
pool of resources that is held and maintained separately from other pools because of the circumstances in which the resources were originally received, or the restrictions on that fund which determine the way those resources are subsequently to be treated.

Governance costs

are the costs associated with the governance arrangements of the charity. These costs will normally include internal and external audit, legal advice for trustees and costs associated with constitutional and statutory requirements. For example, the cost of trustee meetings and preparing statutory accounts.
Any costs associated with the strategic as opposed to day-to-day management of the charity’s activities are included within governance costs. These costs will include any emoluments for trusteeship, the cost of charity employees involved in meetings with trustees and the cost of any administrative support provided to the trustees.

Related parties

is a term used by the SORP that combines the requirements of charity law, company law and the Financial Reporting Standard for Smaller Entities (the FRSSE). The term is used to identify those persons/entities that are closely connected to the charity or its trustees.

Reserves

are that part of a charities income funds which are freely available.

Restricted funds

may be either endowment or restricted income funds, depending on the nature of the restriction. Where the fund is not an endowment fund and is held on trust for spending on specific purposes, it is known as a restricted income fund.
The resources (the assets and liabilities) of each restricted fund are held and maintained
separately from other funds. This is in recognition of the circumstances in which the
resources were originally received, and/or the restrictions on that fund that determine the way those resources are subsequently to be treated.

Statement of financial activities (SoFA)

shows the charity’s income, expenditure, gains and losses and transfers between funds during the the financial year. The statement reconciles total funds brought forward and total funds carried forward at the end of the financial year.

Statement of recommended practice (SORP)

is the official recommendation on the way a charity should report annually on its resources and activities.

Unrestricted fund

It is a legal term for the surplus (unspent income) held by a charity. This is comprising money and other assets that can be used for any of the charitable aims of the charity. The use of unrestricted funds is not restricted to any particular charitable purpose of the charity.