Introduction to Managing Your Finances Date 20th November 2018 Diane West

Learning Aims This webinar session will cover: The basics…..setting up Developing your annual budget Understanding the cashbook Dealing with Petty Cash Managing Income & Expenditure

The basics…setting up Setting your financial year Appointing someone responsible for finance Setting a reporting regime Doing simple accounts

Developing your annual budget Starting point for good financial management is to estimate what you think you need for the next 12 months. Understanding the level of funds coming into the group, the income. Ensure that your expenditure is within the levels of income that you have.

Budget headings Made up of income and expenditure Income 2018/19 Donations Hall Hire Grants Contracts Fees for Services Expenditure Accounts Internet and Telephone Postage and Printing Travel and Training Website Total

Budget headings AGM Rent Committee meetings Printing Volunteers expenses Staffing costs Heat/light Mobile Insurance Training and DBS checks Licenses for playing music or DVDs

Accounting for income and expenditure When setting a budget we focus on: Confirmed Income & Expenditure Expected Income & Expenditure Don’t include details of income you haven’t yet applied for or that you think you might have.

Key Points to Remember Don’t make up costs – ‘best informed estimate’. Income/expenditure amounts need to balance. Avoid setting a deficit budget – unless you have funds carried forward to cover it . Any new income received – then change the figures as you go.

Setting up Financial Systems You can manage finance in a number of ways: Manual receipts and payments Excel spreadsheets Finance software: Quickbooks; SAGE

Pros and Cons of ….. Which will be the best for you?? Consider: Skill / IT levels of people in the organisation Cost of any system How information can be shared How information can be stored

Understanding the Cashbook Cashbook – record of all receipts (income) and payments (expenditure) for the group. Same principles apply whether the system used is manual or electronic. All cash and cheques need to be recorded and paid into the bank to create an audit trail.

What is an audit trail An audit trail can be either a paper or electronically based trail that provides documented history of a transaction within a group. It allows an auditor/independent examiner to trace the financial data from the cashbook to the source document. E.g. Invoice/online payment/bank statement

Recording Income Date Detail Ref Amount Grant Donation 20/11/18 Grant from Lambeth 2205 £300 21/11/18 001 £60 002 £10 Total £370 £70

Understanding the Cashbook (3) CASH PAYMENTS (EXPENDITURE) Payments to be made by cheque, Direct Debit or BACS where possible. Payments should not be made unless the expenditure can be verified by a valid invoice OR form of documentation e.g. email receipt/invoice.

Recording Expenditure Date Detail and comment Ref Amount Building Printing 20/11/18 Travis Perkins Inv 33 £65 21/11/18 Happy Snaps (AGM) Inv 55 £17.50 Lidl (refreshmts) 7 £8.50 Total £91

Petty Cash – Key Principles Make educated guess as to what level of ‘float’ likely to need (often small amounts e.g. £50/£100) Use a lockable cash box – keep in secure place Ensure that no payment is made with proof of expense incurred All claims to be signed and authorised

Accounting for Petty Cash Every time petty cash is paid out the relevant paperwork needs to be completed If receipt not available – i.e. oyster card, still complete a voucher with full details Consider setting a maximum amount to be paid out in cash

Accounting for Petty Cash Each voucher dated/numbers and entered in book and filed Each voucher signed and authorised When reconciling petty cash book with balance in tin do it with a second person When recording details try to use the same categories as in cashbook so that the headings tie up with other areas of expenditure

Managing Income & Expenditure Process of financial management within organisation is an ongoing activity there are key financial practices: Reconciliation Management Accounts Cashflow Projection Essential that the system keeps a regular check on the financial position at any one time

Reconciliation Purpose: check income and expenditure in line with BANK ACCOUNT and understand the current financial position Essential in understanding the cash flow position of the organisation - is there enough money in the bank to pay the bills that will be due

Steps of Reconciliation This is a simplified checklist …… Bank Balance at the beginning of the period List of income List of expenditure Any cash in hand Bank Balance at the end of the period

Reconciliation Bank Balance …….. £2056 1/9/2018 Income Total £200 For the period of September to November Bank Balance …….. £2056 1/9/2018 Income Donations Grants Fees for Services £200 Total £200 Expenditure Accounts Internet and Telephone £50 Postage and Printing £6 Travel and Training Website Total £56 Bank Balance …….. £2200 30/11/2018

Reporting to your committee So each quarter the committee need to have a report which lets them know: Whether the budget is working Any big differences between what you thought you were going to get as INCOME and what you have spent Whether the CASHFLOW is healthy and whether or not action will need to be taken and minuted

Key Internal Controls Banking Arrangements Signatories Authorisation levels

Jargon Revisit Income Simple Accounts Expenditure Restricted Cash flow Unrestricted Budget Creditor Reconciliation Debtor Capital Revenue

Common mistakes…pitfalls Recycling income Misuse of Petty Cash No audit trail No second person to authorise Pre signed cheques No reconciliation