Financial Management & Reporting for Local/National Civil Society Organizations Day 02, 01 November 2017

Day - 2 Accounting Software

Accounting Software Preparation of financial reports Project wise expenditure report Project wise ledgers Project wise trial balance Consolidated project reports Income and expenditure reports Balance sheet

“An estimate of income and expenditure for Budgeting Budget is defined as: “Planning the activities of an organization’s programs according to available resources” or “A quantitative expression of plan for a defined period of time” “An estimate of income and expenditure for a set period of time” Or “A budget is an itemized summary of likely income and expenses for a given period”

Budgeting Characteristics Should be in line with the planned activities (objectives, mission) Separate planning/resource allocation for each accounting period It should be as realistic as possible “The real budget starts where assumptions end”. Should relate to the needs of the organization Important points for preparation Work plan (short-term, long term) Last year expenses analysis, experiences Availability of funds Market survey Increase or decrease in HR / activities / tasks Inflation element

Why a budget Tool for the management of an organization’s cash resources Control over expenditure and ensure funds Plan for the mobilization of resources to achieve the objectives of an organization Monitor the effectiveness of planning and implementation Evaluate performance of the managers

Types of budget Programme budget Programme Management budget Administrative expenses budget Fixed assets budget Training technical and development budget Master budget

Budgeting (continue) Budget Manual/Notes:is a document schedule or booklet about the organization policies, procedures, roles & responsibilities of people, which guides and explain the persons in preparing & finalizing various budgets and understanding/ explanation of key budget’s calculations. Sectional Budgets are prepared for various functions/ departments/ sections of the organizations while Master budget is a consolidated summary or a main report of the various sectional budgets “

Session 4 Banking Procedures

Banks and Cheques Money in a bank is safe from thieves       Using cheques is safer than carrying large amounts of cash A bank account help keep better control over money When you deposit money in a bank, the bank invests it and makes a profit. If you open a savings account, the bank gives you a small part of the profit, by paying you regular interest.

Banks and Cheques If you open a current account, you can withdraw your money whenever you want. But you don’t get any interest, and the bank may charge a small fee for taking care of your money. With a bank account, you get a cheque book. A cheque is an instruction to the bank. It tells them to give some of your money to someone else (the payee).

Banks and Cheques To open a Bank Account, you will need the following documents  A copy of the legal paper setting up your organization (e.g Memorandum and Articles of Association, Certificate of Incorporation, Form 29 and BOD resolution and copy of CNICs of BOD members An organization bank account should be opened in the name of the organization, NOT in the name of any single individual. There should be joint signatories to the account and maintain proper bank authorization letter.

Banks & Cheques(Types of Cheques)   An open cheque, can be cashed by anyone who presents it to the bank. So it is not safe – it’s just like cash. A bearer cheque can be cashed by the person to whom it has been issued A crossed cheque can NOT be paid as cash – it can only be paid into the bank account of the payee named on it. So a crossed cheque is the safest way to make a payment. STUB: Date – name of payee – reason for payment – previous balance – amount of this cheque CHEQUE: Date – name of payee – amount (words) – amount (figure) – signature. Don’t leave any spaces in which the payee could change the amount!!

Bank Reconciliation At the end of each month you should receive a statement from the bank which indicates: the bank balance from the previous month all deposits made to the account all withdrawals from the account (i.e. cheques, bank charges,etc.) the new balance according to the bank records A monthly bank reconciliation is a useful means of verifying the accuracy of your records. This exercise balances your bank statement with the cash book.

Bank Reconciliation(steps to prepare..) Ensure that the current "opening balance" equals to the previous month's "closing balance" on the bank statement. Contact the bank if these amounts differ  Deposits that have been made but are not recorded in the Bank Statement are entered in the "outstanding deposits” space of the Bank Reconciliation form. The total "outstanding deposits" added to the "Balance as per the Bank Statement" equals the "Revised Bank Balance".  Cheques recorded in the cash book but not presented for payment are entered as an outstanding cheques.  Note: Enter all "outstanding cheques" up to the date of the "Bank Reconciliation".  

Bank Reconciliation(steps to prepare..) All bank charges not already entered in the cash book must be entered now and the total of these amounts subtracted to obtain an up-to-date cash book Balance Subtract the total "Outstanding Cheques" from the "Revised Balance" as per the Bank Reconciliation form to obtain the "True Bank Balance" as at the date of the exercise.   Enter the New cash book Balance and the "True Bank Balance" should be the same. If they are not, recheck your additions/subtractions and/or entries for errors or omissions. Note: Items charged to the bank account by mistake should be brought to the attention of the bank immediately for corrective action.

Project Financial Reporting Monitoring Current Month & Cumulative Totals: In practice, there are three time periods over which it is usually most useful to monitor expenditure: 1   Monthly – i.e. the money spent this month; 2  Quarterly – i.e. the money spent over a three months period; 3 Cumulative total to date – i.e. the money spent from the start of the project up to the present time.      

Project Financial Reporting (continue) B C D E F=D-E G H=B-C I Budget line items Total Budget Cum Exp Q-4 Budget Q-4 Exp Q-4 Var: % Project Variances Reasons Grand Total Targets planned Targets achieved