An online learning resource for community groups
Module 7: Looking after your group’s money
Introduction
The purpose of this module is to help you to manage your group’s money.
At the beginning, many groups will operate with little or no money. They often depend upon people giving up their time (volunteering) and members contributing to the organisation (donations). There is nothing wrong with this, but usually as groups begin to grow, they start to need more money for the activities they want to do. Even if you are a very small group, it can often be useful to have some funds for your activities (for example, refreshments, venue hire) and to be able to cover the expenses of your volunteers.
Looking after the money of a group is different from looking after your own money. The main difference is that the money doesn’t belong to you. It belongs to the group and there may be restrictions or criteria on how the funds can be used. This is why you need to be open about the money you have and how it's being used and looked after. It’s important to make sure that the money is spent correctly and that you have all the necessary paperwork. And you usually have to report to your funders and your members on how the money has been used.
This module will help you to
Understand your responsibilities around managing your group’s money
Develop clear financial procedures for your group
Show funders that you have procedures to manage your group’s money
Create a Project Budget for your organisation and/or your activities
So let’s get started!
Explore the modules
Let’s get started – Managing your group’s money
As a group, discuss:
How do you currently manage money as a group?
How well do you think it's working?
Is there anything that you would like to improve or change?
Write your answers onto a flipchart or note them in this form.
1. Looking after your group’s money – roles and responsibilities
As a group, you are responsible for any money that your group receives, whether that is from funders, members, donations or from your own income-generating activities.
The money that your organisation receives doesn’t belong to you, it belongs to the group. This means that you have to manage the money very carefully and be able to account for it all.
This is why your members or wider community should know how you're managing money on their behalf and be able to ask you to share how you are doing that from time to time, or to raise any concerns.
While the treasurer on your committee may have extra responsibilities around managing the money or making financial reports to the committee, ALL committee members are jointly and individually responsible for the organisation’s money.
Getting it wrong can do a lot of damage to your group, your committee and its reputation. And can undermine your ability to attract funds in the future. When this happens it's usually because of mistakes or a lack of good financial procedures.
It is a good idea to develop clear financial procedures to make sure that everyone in your group is clear about how the group’s money is managed and who is responsible.
Now watch this presentation on Roles and Responsibilities (in relation to looking after your money)
Group discussion 1 Roles and responsibilities
As a group, discuss:
Who are the people responsible for managing the organisation’s money?
What are their roles and responsibilities?
Make notes and complete Section 1 & 2 the Finance Procedures Template.
2. Looking after your group’s money: Developing good financial procedures
Once you understand what needs to be done and put it in place, looking after money is fairly straightforward.
It's about having a system and procedures which are used consistently.
Your procedures can develop as you do - as you start to do more complex things like pay wages or gather income.
These protect your money and also everyone in your group.
Watch this presentation on developing good financial procedures.
Group Discussion 2 - Developing our own Financial Procedures
Work through each section of the Finance Procedures Template.
Discuss and agree:
Who is setting up the Bank account and who are the bank signatories?
Who is managing the bank account?
How are we recording all income and expenditure?
What rules will we have for cash transactions?
How will our petty cash system work?
What will we have as financial reports at committee meetings?
How will we prepare Annual accounts?
How can we go about gathering some reserves?
Add everything agreed into the Finance Procedures Template.
3. Making a budget
To help you manage your group’s money well, it’s important to plan ahead and to work out how much money you will need for a particular project or timeframe. This is called a budget.
Some people use a budget for household costs or for shopping, for example, working out the cost of everything that they will need and checking that they will have enough funds to cover it. The process for developing a budget for your organisation is very similar.
A budget can help you to monitor the money coming into your organisation (income) and the money going out (expenditure) and to make sure that you have enough money for your activities and don’t overspend or run out of funds.
Watch this presentation on how to go about making a budget.
Group Discussion 3: Making a budget
Have a look at the Budget Template. You will see that there are four tabs with different budget options for you to use.
Using either the Simple Budget Proposal tab or the Whole Organisational Budget tab, work through the template and add:
Name of budget
Timeframe – what time period does the budget cover?
Items to be funded
Description of how costs worked out
Costs of each item
Total cost of project/activity
You can save this template and update it throughout the year. This will also help you to develop funding applications and to work out which funders you can apply to for which projects.
4. Annual accounts
Each year, it is good practice to produce your annual accounts, even if you only have a small amount of funds. This will help you to develop the skills to produce them and will also help when you come to apply for funding as funders will often ask to see your annual accounts.
In the UK, it is common for the financial year to run from 1st April in one year until the 31st March in the next year. You do not have to use these dates, but what is important is that you know when your accounting year starts and ends and that this is shared by the whole committee and anyone else who is responsible for managing your group’s money.
If you have very small amounts of money, then you probably don’t need the accounts to be checked by anyone else. However, if your group starts to get bigger and starts to bring in more money, then it is good practice to get your accounts checked by an independent person. If your organisation gets bigger still and starts employing staff and bringing in more money, then you can also employ a bookkeeper or an accountant to do your accounts each year and to independently verify them. You should put these costs into your budget and into your funding applications.
Your annual accounts should show:
Income you have received in that year, usually split into Trusts and grants, donations, income generated by organisation
Total income you have received
Expenditure during that year, usually split into the main categories, for example, staff, volunteer costs, various projects, running costs
Total expenditure in that year
Surplus or deficit (take the total expenditure away from the total income)
Total amount of funds in your reserves - this should show restricted reserves (these are funds that you have received which have to be used for a certain purpose) and unrestricted reserves (these are funds which you have built up as an organisation and which do not have any restrictions on how they can be spent)
Download the Annual Accounts template, which you can use for producing your Annual Accounts.
5. Putting it all into practice
As well as monitoring your income and expenditure, it is also a good practice to make sure that your financial procedures are working well and to make any changes where necessary.
Agree how you are going to check that your financial procedures are working well and who is going to do it. It may be useful to have regular finance meetings, which could involve your Treasurer, Chair and any staff members who have a responsibility to manage your group’s money. Agree how often you are going to meet and a date for your next meeting.