Five reasons it’s never too late (or too early) to review your financial systems

 

Whether you run a charity or social enterprise that’s just starting out or your organisation has been established for years, it’s good practice to put the right systems in place from the outset or review what you do regularly. Here, we look at the top five reasons why:

1.       You can avoid costly mistakes

Different organisations need different accounting systems, depending on their size, resources, and the number of transactions they process on a monthly basis. It pays to have systems and processes in place to ensure receipts are stored properly, invoices paid on time, and that restricted funds are kept separate from unrestricted funds. By putting the right systems and procedures in place from the outset – or refining what you currently do -, you can avoid falling foul of legislation or submitting financial statements that are incorrect.

2.       You will present your organisation in a professional light

As you know, charity accounts are a matter of public record, noted on the Register of Charities for government or public perusal. It is essential that you present your organisation in a professional light, and carve out a reputation for integrity and financial transparency. As discussed in last month’s blog – Not outsourcing your accounts could be losing you moneythe public and donors are generally wary about how charities spend their finances. Having watertight, comprehensive systems can safeguard a favourable public perception.

3.        You can stay ahead of legislation

The public sector is tightly regulated and controlled by extensive legislation. This particularly applies to how your organisation manages its finances and where particular funds can be spent. Having the right financial systems in place can help you stay ahead of legislation changes or to adhere to current rules. Implementing strong systems and processes from the outset will also stand you in good stead during an independent audit of your organisation’s finances.

4.       You can harness the potential of financial forecasting

Accurate financial forecasting based on supporting data is a cornerstone to the future success of your charity, and the key to weathering the current economic downturn. By identifying where money comes in and out of the organisation, you can plan ahead and ensure that budget allocation reflects what you can afford.

Financial forecasting also helps you identify the charity’s most profitable areas and where extra funds would secure the best return, while spotlighting areas for cost-cutting. It is much easier to keep control of your finances if they are properly tracked, accounted for and forecasted.

An accountant with third sector experience can explain which figures you need to monitor and how you can put together a comprehensive financial forecast.

5.       It supports the decision-making process

Every charity needs strong financial management that is underpinned by the right systems and processes. Financial management doesn’t just involve bookkeeping. Instead, it encompasses planning, controlling, organising and monitoring your financial resources to achieve your charity’s mission. By this, I mean that every organisation should have goals and objectives for the future. By understanding your charity’s finances, it is easier to make decisions based on whether they take you closer to or further away from those objectives.

Getting away from the ‘That’s what we’ve always done’ mindset

I’m sure you’ll agree that the third sector is often guilty of a ‘That’s what we’ve always done’ mindset, but it pays to refine what you do regularly. Tightening your systems and processes can improve efficiency, free up valuable time, build the reputation of your organisation, and encourage public engagement.

An experienced accountant can advise you on everything from which accounting software to use, to Gift Aid, creating new income streams, funding avenues, strategic and financial planning, and understanding how financial legislation affects your charity.

If you feel the time has come to review your financial systems or you need help making sure the right processes are in place from the outset, give SDW Accounting a call and we’ll be happy to help.

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