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Helping groups manage their money effectively

It is vital that good financial systems, procedures, and policies are in place for any organisation to run successfully – even more so for third sector organisations as resources are stretched.

As well as finding guidance here about different aspects of financial health and best practise, you can get additional support and information from WYCAS (West Yorkshire Community Accounting Service)

WYCAS is a charity that supports organisations to manage their finances efficiently, effectively and adhering to regulations. They provide advice, one-to-one support, group training, plus account preparation and independent examination. These services are either free or at a competitive rate, depending on your organisation’s status and turnover.


Find sessions relating to finance and accounts

Regular training sessions are scheduled, usually by VAL and WYCAS, to help organisations and small groups with their finances and accounts.

To find out more about upcoming courses and how to book visit the Training page or start your search now.

Finance Information

This guidance provides an overview of the main elements of financial management for organisations, tailored to small groups.

The information is arranged by the four financial pillarstones that support successful finance management, which are (select each to skip to section):



A budget is a financial  plan for the whole organisation or part of it.

You should have an annual budget for the whole organisation but you may also need to budget (or cost) for a funding bid or a project within the organisation.

Budgeting – Action Checklist

  • Start planning in good time
  • Consult stakeholders (staff, committee, members)
  • Prepare a clear plan of what the organisation will do
  • Work out costs for continuing work based on current year’s figures
  • Work out costs for new work by researching similar projects
  • Double-check salary costs
  • Think creatively about sources of income
  • Check likely grants from funders
  • Compare income with expenditure and adjust if necessary
  • Present budget to committee for approval
  • Compare budget with actual figures throughout the year

For more details, view or download WYCAS’s Good Practice Guide N.24: Budgeting.

For a simple budget preparation template in a spreadsheet:

Tools – WYCAS (and select Budget and cash flow template – excel format)

For a tool to help with budgeting salary costs click the Salaries costing template on the same webpage

Full Cost Recovery

Full Cost Recovery is a method of calculating the cost of your services, to inform your pricing decisions.

To start the calculations you’ll need the full budget for your organisation. There are 4 steps to the process:

  • Identify the different projects/cost centres
  • Identify their direct costs
  • Share the overheads, using an appropriate basis of apportionment
  • Total the costs for each project/cost centre

The unit cost for each output from the project/cost centre (U) can then be calculated by dividing the total project/cost centre cost (T) by the number of outputs (O). (T ÷ O = U)

This information can be used to inform pricing decisions (along with comparison to the market rates). View or download WYCAS’s Good Practise Guide N.23: Full Cost Recovery.

For templates and worked examples of Full cost recovery calculations see the Costing and Pricing section of this page Tools – WYCAS

Cash Flow

Cashflow forecasting is splitting down a budget to monthly ins and outs, to show how cash balances will vary across time.

Cashflow forecasting can be a key part of managing money especially if an organisation is short on reserves or there is a delay in receiving income. Building a robust cashflow forecast is essential for new social enterprises, as a way of anticipating what money is expected to be coming into the business.

A spreadsheet is probably the most useful tool for building a cashflow forecast, if you have limited excel skills, it is recommended that you make an appointment for a one-to-one session, where a community accountant can guide you through the process.

For a simple cashflow template in a spreadsheet:

Tools – WYCAS (and select Budget and cash flow template – excel format)



Bookkeeping is the process of keeping a structured record of all financial transactions.

Most of the time this is done using software on a computer (for example Excel for spreadsheets) or online (for example Quickbooks or Sage) because automations can simplify the process.

The specialist platforms, QuickBooks and Sage have been designed to make it easy for users to keep their books, and often have support available to help with any technical queries. The downside is that they can be costly for small charities

It is possible to keep paper records, as once was the norm, but this can be much more time consuming and risk being damaged if there is only one physical copy – it’s also reliant on good arithmetic!

A custom built spreadsheet  superseded paper records, and can still be an option but this requires knowledge and understanding of certain functionality; such as formulas, tables and reporting in order to be effective.

For a free template which will allow you to record transactions by receipt or payment category as well as by Fund name click on this page Tools – WYCAS and the Cashbook with monthly cashflow option.

WYCAS offer regular free training sessions on setting up and using this template; you can register here WYCAS Mailing List – WYCAS

If you can’t wait there is a video of the setting up and recording process here: Training Resources – WYCAS

Bank accounts and reconciliation

Once your group’s legal structure is in place, and it begins making financial transactions, it will need a bank account.

The governing document of the organisation will usually specify that the account must be in the group name and have dual signatory on payments. It is important to check the governing document before choosing an account to open.

Questions to ask when opening a bank account:

  • What will the bank charges, based on your organisation’s estimated level of activity, be?
  • Will the bank or building society send out monthly statements? Are they free?
  • Is there a minimum balance to open and maintain the account?
  • What interest is paid on current and deposit accounts and when?
  • Will the account allow you to set up direct debits or standing orders to pay regular bills? Do you need two people to approve this in order to set these up?
  • Where is the account held – or where can you pay in and withdraw cash?
  • Is there an ethical investment policy?
  • Are the accounts only available to registered charities?
  • Is there a local representative in your area or someone that you can ask if you have any questions?
  • Is there electronic access to the account?
  • Can electronic transactions be dual authorised?

A bank reconciliation is the process that you go through to ensure that the bank statement and the cashbook agree. This is important to ensure that the organisation’s records are both complete and accurate.

View Good Practice Guide No.3 – Bank Reconciliation


Year End Accounts

At the end of each financial year your organisation will need to produce summary financial statements which will have two parts.

Part 1: Incomings and outgoings for the year, presenting the totals under different categories. This part may be titled the Receipts and Payments account, the Statement of Financial Activities or the Profit and Loss report.

Part 2: A snapshot of what the organisation owned, owed to others, and was owed by others at the last day of the financial year. This part may be titled the Balance Sheet or the Statement of Assets and Liabilities.

The format of these reports will vary with the type of organisation. If the organisation is a company the accounts must be prepared on an accruals basis. If the organisation is a Community Interest Company (CIC) a CIC34 report must accompany the accounts. Also Corporation Tax must be calculated and paid on any profit in the year.

For guidance about how to prepare your accounts see the Charity Commission website or discuss with a community accountant at WYCAS. Contact Us – WYCAS

Who is interested in your organisation’s year end accounts?

  • Members
  • Management committee
  • Funders
  • Regulators (eg. the Charity Commission, Companies House)
  • HMRC (tax inspectors)

Management Accounts

Management accounts are produced to inform the trustees/managers of the financial position of the organisation throughout the year.

The information which is shared may include:

  • Actual ins and outs to date
  • Comparison to budget year to date
  • Bank and cash balances
  • Reports on funding pots: how much has been spent on each?
  • Forecasts of spend and income in future periods

Action checklist for management accounts:

  • Check that your organisation produces management accounts
  • Check that actual figures are compared with the budget
  • If figures on the restricted funds are not provided to the committee check that someone is monitoring them
  • Check that notes are provided to help understanding
  • Check that management accounts are produced regularly
  • Allow time for discussion of the management accounts
  • Remember the golden rule “there is no such thing as a stupid question”!

Reporting to Funders

Funders will usually ask for monitoring reports about how you have spent their money – figures as well as words.

Your report will need to show, by category, the spend incurred so far and what the remaining balance of the funding is.

Your cashbook (for recording transactions) will need to be structured to collect this information.

For a free template which will allow you to record transactions by receipt or payment category as well as by Fund name click on this page Tools – WYCAS and the Cashbook with monthly cashflow option.

Audit and Independent Examination

The term “audit” is often used to describe the checking of the bookkeeping and accounting records.

A full audit for a charity is only required when the income exceeds £1,000,000 — unless a funder insists on a full audit by a registered auditor, or it is expressly stated in the governing document.

For charities with income of over £25,000 an independent examination is required. This is a legally acceptable form of external scrutiny of their end of year accounts. There are rules for who can do this and guidelines on how it should be done. Some organisations may opt to have an independent examination, because their constitution requires it, or they want an assurance about the quality of their record keeping.

Many smaller groups will have an independent check of their records, alongside the accounts preparation work. This will give some assurance about the bookkeeping and the documentation kept by the organisation.



Management committee members, staff and volunteers may all need to claim expenses and proper procedures need to be in place.

Some good practices for expenses are:

  • Produce written guidance as to what can be claimed, at what rate and within what area
  • An expenses form should be devised for claiming expenses
  • Expense claims should be backed up by bills or receipts
  • Reimbursement should be a straight payment of actual costs rather than rounded up
  • Expenses should be claimed regularly e.g. Monthly
  • An appropriate person should check the expenses carefully and authorise them as reasonable and necessary
  • The following link is to a spreadsheet template for travel and expenses claims, receipts and payments
  • Help & Advice for TARAs – WYCAS


Reserves is unrestricted income that is not yet spent, committed or designated.

Having a reserves policy is a sign to funders and donors that you are following good practice and that you take financial management seriously.

Your reserves policy should include 4 things:

  • A justification for holding the reserves in the first place
  • The level of reserves that it has been agreed should be held (usually stated as a target range)
  • The steps that you are taking to get to or maintain that level of reserves
  • The arrangements for reviewing the policy and the level of reserves

Claiming Gift Aid

Gift Aid is the basic tax which charities can claim back on donations made to their charity, where the individual donors have already paid income tax.

A £100 donation from an individual is worth £125 to the charity if Gift Aid is claimed. This is because basic tax is paid at 20%, so the tax paid by the individual would have been £100 x 20/80 = £25. The charity can reclaim this tax.

There are 3 conditions which must be met before the charity can claim the Gift Aid:

The Gift Aid Small Donations Scheme (GASDS) means that eligible charities can claim a top-up payment on cash donations of £30 or less without the need to collect Gift Aid declarations. Charities will generally be able to claim on small donations of up to £8,000 per year.

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