Charity Digital – Topics – Getting started with exercise | SehndeWeb

Now that HMRC’s self-assessment season is over, it’s time to turn the page and prepare for the exercise ahead. We’ve got some tips and tricks for keeping your finances in order, looking at what works and what doesn’t.

Create a realistic budget

Reviewing income and expenses is at the top of the list of ways to start the new year. The NCVO offers best practices in budgeting. They propose a reflection process that includes the following questions:

  • What are charity projects?
  • What are the resources?
  • How much will it cost?
  • Where will the funds come from?
  • Can we afford it?

These questions help frame budgets and determine whether or not charities can tackle wish lists. Remember, avoid fanciful thoughts at this stage.

Review your cash forecast

Establishing a cash flow forecast on a monthly basis helps charity finance managers anticipate upcoming revenues and bills. Monthly breakdowns clarify what each period looks like, so the whole year becomes more manageable.

BDO, the accounting firm, emphasizes the importance of cash flow forecasting for charities and nonprofits. They recognize that one of the main benefits of this process is to build organizational resilience through testing.

They say, “Scenarios allow charities to consider uncertain outcomes and prepare for future events, allowing them to adapt more quickly and in a more measured way.”

Use digital to plan with precision

Using government approved software eliminates the hassle of ensuring tax forms are accepted by HMRC. The software is aimed at charities of all sizes.

For smaller, less complex organizations, Zoho manages finance, people, and CRM data. Xero, the small business owner, also gets credit. The platform’s easy-to-use financial system means even tech newbies can produce budgets, balance sheets, cash flow and accounts.

The added benefit of digital systems is that they reduce the propensity for errors compared to manual entries. Financial management systems typically pull raw data directly from bank accounts, so there is no need to enter data.

Review regularly

While many charities aren’t required to produce quarterly financial reports, getting into the habit of doing so informally helps CFOs stay on track. Reporting to senior management ensures that decision makers have the information they need to assess and act quickly.

Understand how you will be in a hurry

The coming year looks a little different from the previous ones. UK media headlines report rising fuel and living costs, translating into higher costs for businesses and other organisations. For charities, the impact can mean reduced revenue or increased costs.

The best advice here is to look at the expense items and intensely assess whether those costs are justified. Many charities have already found that with hybrid working there are many opportunities to save.

Collect market information

Learning about charity finances and staff training is another great way to start the new financial year. Gaining insight into the factors impacting funding prepares teams for any future boom or downturn.

At Charity Digital, we have reviewed reports from the past and summarized both the state of charity finance management and the health of the sector.

Besides finance, charities may also consider gathering market intelligence from their own specializations. Talking with donors and recipients can help assess what the year ahead will look like.

Perform a quick health check

A quick, ticked-off approach to charity finance benefits time-strapped managers. Doing a financial health check on a regular basis assesses whether or not teams are functioning as they should.

At Charity Digital, we support small charities by providing a free checklist.

Plan for extraordinary expenses

Nobody wants a rainy day to come, but plans have to be in place. The provisioning of extraordinary expenses is essential. In accounting terms, this could take the form of maintaining cash and cash equivalents at healthy levels. From a policy perspective, ensure that procedures are in place when deciding whether or not to issue an emergency funding appeal.

Schedule time for training

To start the exercise on the right foot is to engage in the rise in skills. For charity managers, online courses are available. The NCVO regularly offers digital courses on the basics of charity finance.

The Charity Finance Group is also offering online training for those looking to understand what finance looks like in a post-COVID-19 world.

Know your tax relief

Charities benefit from many types of government tax relief. In general, they do not pay tax on income used for charitable purposes, but there are other types of relief. For a full list of details, familiarize yourself with HMRC’s tax framework.

For financially savvy charities, it may be helpful to consult expert attorneys on how charitable structures can maximize tax relief.

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