Charities play a crucial role in society, providing essential services and support to those in need. However, running a charity involves more than collecting donations and managing charitable activities; it requires effective financial management and compliance with accounting regulations.
But, charity accounting can be complex for the uninitiated. And that’s where charity accountants come in.
Specialised in managing the finances of non-profit organisations, these professionals will ensure that your charity meets its legal obligations and makes the most of its financial resources. Let’s take a closer look at how an expert can help with your charity accounting.
Regulatory compliance
One of the most important services charity accountants offer is regulatory compliance, in which they will work to ensure that your charity complies with all relevant laws and regulations.
In the UK, charities are regulated by the Charity Commission, which sets out the guidelines that dictate the rules that charities must follow to operate, including those related to financial transparency and reporting – which are especially important in the charity sector.
These guidelines are complex, and your accountant will help you navigate these complexities; they’ll draw up and submit your financial statements and annual returns to the Charity Commission, prepare your accounts according to GAAP (generally accepted accounting principles), and manage different types of funds.
Your charity accountant will also provide advice to help you improve your governance and internal controls so you can minimise the risk of financial mismanagement and fraud, ultimately protecting your charity from potential fines and penalties.
Gift Aid management
Gift Aid is a significant tax relief scheme for charities, allowing them to claim an additional 25p for every £1 donated by a taxpayer at no extra cost to the donor. This can be a valuable source of income but it requires proper administration.
Charity accountants play a crucial role in Gift Aid management, making sure that your charity complies with all of HMRC’s rules concerning the tax relief scheme. They’ll check that donations are eligible and all claims are processed accurately, keeping detailed records in case HMRC conducts an investigation.
Gift Aid management is an essential mechanism for charities to make the most of every donation and a charity accountant will help you do just that.
Grant accounting
Grants from the government, trusts or foundations are critical funding sources for charities, helping them offer more crucial services. These grants often come with specific terms and conditions, however, regarding how the funds must be used and how they should be reported. Failing to manage grant funds properly can result in penalties or the loss of funds outright.
Grant accounting is therefore an essential aspect of charity accounting, in which the charity ensures that all funds are used in line with the conditions set out by the grant provider.
To help, an accountant will carefully track how the funds are spent, keep detailed records and produce financial reports for grant providers when they ask for them. They will also help you allocate funding to appropriate projects or activities and monitor spending to ensure that the charity is operating efficiently and remains within its budget.
Budgeting for funding cycles
Gift Aid donations, grants, government funding and more: charities often rely on a mix of income sources. Income can therefore vary from year to year, meaning that charities must carefully plan to ensure they can sustain their operations throughout consecutive funding cycles.
Your accountant will help you budget for these fluctuations, helping your charity remain stable. They work closely with charity managers to create detailed budgets and cashflow forecasts.
They’ll also help you plan for periods of lower funding and suggest strategies to help you allocate resources in a way that meets your mission while not overextending the organisation. In other words, your charity will be able to assist the communities and goals you set out to help far into the future.
For professional charity accounting services, get in touch with us. Let’s see how we can help.
