Trustees and Charity Finance: three lessons

I've been lucky enough to be a trustee of various charities for more than twenty years and for almost half that time I have had the role of treasurer.

When I first came across charity accounts I found them hard to understand.  I blame the bizarre distinction between unrestricted and restricted income but whatever the reason I have to confess that on occasion I have signed off numbers I didn't fully understand and probably infuriated the executive with time-wasting questions. 

So for trustees looking to avoid the same fate here are three hard won lessons:

First, manage by cashflow.  If they don't already do them ask your executive to produce cashflow forecasts and update them for every board meeting.  At every board meeting you will be able to see how much money you have in your bank account and how close this was to the forecast.  You will also have a clear view of when money runs out.   Bank accounts are less fudgeable than management accounts or indeed audited accounts.

Second, monitor new income.  If your charity spends £1.2m annually, then you will need to bring in an average of £100,000 of new money every month or else at some point the engine will splutter.  This isn't as easy to monitor as it might sound: often new money comes in big lumps, and the accounting practices for restricted income make it easy to double count multi-year projects.  So be sure to have it as a specific number every meeting, even if sometimes the number is zero.

Third, understand the plumbing (at least once).  At some point, ideally just before you become a trustee, take the time to sit down with the finance manager to run through in rigorous detail how information about money is collected, presented and checked.  This will (hopefully) give you confidence that the numbers you see are accurate and give the finance manager confidence that you're paying proper attention.

And of course at all times you should feel as if you're working with rather than against the executive.  A shared and clear understanding of the finances will help achieve this and make it easier to focus on whatever  charitable outcomes you are trying to achieve.

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