Helping Your Charity Understand The Challenges Of Accountancy


Whether you’re faced with the day to day management of a charity, or you’re just on the board of trustees, the last thing you want to be worrying about is how the charity’s own accounts are dealt with.

There are a number of issues which charities might face when it comes to handling their accounts, and many of these can seem quite complex and daunting. For example:

  • navigating tax regulations;
  • paying appropriate salaries;
  • and keeping up to date with accurate records.

Understanding these challenges and having the right accountant to turn to when help is required can be vital for the success of your charity.

We’ve undertaken a lot of work in relation to registered charities. A number of our team have been privileged enough to be trustees of both large and small charities, so we’re no stranger to the problems which they can face, and want to offer our help wherever possible.

Here are a few of the common accounting challenges charities may face:

No Business Background

When you have a profit-focused business, the chances are that you have a good idea of how the finances of your company will work, or at the very least, have a very general understanding of the accounts of your business and how they will support and grow your financial position.

For many charities however, trustees are often chosen because they have a passion for the charity’s goals, and can bring something to the table to help the charity achieve its aims, whether that be a certain skill set, a particular knowledge or a host of connections.

This can be inspiring and motivating, but the trustee may not be so business minded or interested in looking at the accounts.  It may even be that financial results get put on the back burner because the activities of the charity are seen as transcending minor details such as the financial numbers. After all, your charity isn’t there to make money.

Though it’s through no fault of your own, your trustee or those leading the charity could have a weak financial background, which can hinder you when it comes to even the most basic accountancy practices.

Having a trusted accountant you can turn to – whenever you need some help, training, or advice – could make all the difference.

Trustees Regularly Changing

Another challenge charities face concerns the frequency with which trustees change over. Due to the nature of some charities, trustees may only stay involved for a short period of time, whilst interests are aligned or when their help is actively needed, and then they might take a step backwards so another trustee can have a positive involvement.

This might work great at driving the charity forward and achieving its goals, but it can be a real problem concerning your internal accounts.

We’ve specialised in helping a number of pre-school groups for example, which are often registered as charities. The trustees of these pre-school groups are usually the mothers of the children who are currently enrolled and attending that nursery. When their child leaves that group to start school, more often than not the mothers will step down as a trustee.

Any knowledge of the charity’s accounts which has been learnt over that time is then in danger of being lost, if records are not transferred and explained appropriately.

Restricted Funding & Understanding Regulations

Perhaps the biggest challenge you face when dealing with your own accounts is restricted funding. You work hard every day to get as many donations and as much support as possible, and money is often very limited. Rightly so, the money raised should be put to the best use possible.

This poses problems though with your own accounts, as charities often have a very limited budget to work with accountants. You might not be able to afford to outsource financial planning or payroll services,  or even seek the appropriate advice concerning bookkeeping or incorporation.

There may even be tax incentives or government schemes you could take advantage of, but there isn’t the expertise or the knowledge to go about starting the process.

Planning Is Key

The more comprehensive your charity’s plans are, both for the current financial year and into the future, the better your chances at being successful and avoiding any financial complications.

This planning doesn’t need to be elaborate, and often just by seeking the advice of a qualified and trusted accountant in the early stages, your charity can save a lot of hassle, trouble, and money in the long run.

If you speak with an accountant who has specialist knowledge in the field in which your charity operates, you’ll be able to get expert advice and all your technical questions answered, helping you run the accounts of your charity smoothly and effectively.

A good accountant will help you with any statutory challenges your charity might face, and advise you on whether incorporation is the best option for you. They will be able to guide you through the necessary steps to take advantage of any financial incentives available, and help you organise your own bookkeeping. With a little training, you’ll be able to keep accurate records yourself, and the more you do that, the less you’ll have to pay to an accountant.

And of course, a good accountant will be at the end of the phone to answer any questions you have, without any additional charges being incurred.

If you want to make sure your charity’s accounts are all in order, then just pick up the phone and call us. We’ll be more than happy to help.