Managing money and resources well is a key aspect of successful and sustainable fundraising. For small groups raising modest funds it can be relatively simple but they still need to be able to budget and cost work accurately and to keep formal accounts. For larger organisations dealing with lots of activities, sources of funding and key resources, it quickly becomes a more complicated aspect of running an organisation.
Managing money encompasses various activities including:
Budgeting and forward financial planning
Being able to accurately identify costs and project forward to future years is essential to running an organisation, particularly when planning for fundraising in future financial years. This activity includes the need to be able to accurately identify the full cost of running an activity or service – often referred to as Full Cost Recovery (FCR)
Cashflow management
Being able to accurately predict how much money is coming in and when, against how much money is going out and when it is likely to, enables an organisation to manage its cashflow. This is essential in order to make good use of any funds in hand (by leaving them in an interest bearing deposit account if they aren’t needed for instance), and helps avoid unauthorised overdrafts, which cost a lot in charges. If there are gaps between expenditure going out and income coming in, organisations may need to negotiate overdrafts or loans to keep things running.
Accountability
Voluntary and community organisations of all types - however they are funded – have to be accountable to a range of people for the way they spend their money. It is not just the funder who has the right to scrutinise this spending. The use of tax concessions means that HM Revenue and Customs also have the right to scrutinise the books, and the public benefit aims of voluntary organisations means that the wider community may ask questions about the application of funds.
Most constitutions will also give members the right to challenge the organisation. Keeping a tight rein on spending and being able to demonstrate exactly where funds have been spent is a crucial aspect of being accountable. Enabling this accountability is often referred to as ‘transparency’, and the detailed systems which deliver it as an ‘audit trail’.
Accounts
All organisations have to keep formal accounts and produce an annual statement of the accounts. The detailed requirements and their various names vary depending on the legal structure of the organisation and its turnover.
Handling cash
Cash transactions can vary immensely. For some organisations these can be relatively small amounts, perhaps no more than petty cash transactions; for other organisations these transactions can be substantial. All transactions, however, warrant close management and tight controls are needed to enable organisations to record these transactions and account for the cash.
Financial controls
‘Internal financial procedures’, ‘financial standing orders’ and ‘finance policies’ are all terms that describe the financial controls and systems that organisations use, to ensure that each and every transaction is properly authorised and recorded.
