Conducting a Comprehensive Review of Charity Finances

Managing the finances of a small charity can feel overwhelming at times. But with the right approach, reviewing your charity’s accounts becomes a straightforward and even rewarding task. I want to share some practical tips and insights to help you confidently navigate this important process. Whether you’re a bookkeeper, accountant, or QuickBooks user, understanding how to conduct a thorough charity accounts review will empower you to keep your organisation’s finances healthy and transparent.

Why Reviewing Charity Finances Matters

Keeping a close eye on your charity’s finances is essential. It ensures that funds are used effectively to support your cause and builds trust with donors, trustees, and regulators. Regular reviews help spot errors early, prevent fraud, and improve financial planning. For small charities, this can make a huge difference in sustaining operations and growing impact.

When reviewing charity finances, I always recommend breaking down the process into manageable steps. Start by gathering all financial records, including bank statements, receipts, invoices, and payroll reports. Using accounting software like QuickBooks can simplify this by organising data and generating reports automatically.

Here are some key benefits of a regular charity accounts review:

• Transparency: Clear records show exactly how money is spent.

• Compliance: Ensures you meet legal and regulatory requirements.

• Efficiency: Identifies areas where costs can be reduced.

• Confidence: Gives trustees and donors peace of mind.

  
  

Reviewing charity financial data on a laptop

Practical Steps for Reviewing Charity Finances

Let’s dive into a step-by-step guide to make your charity accounts review as smooth as possible.

1. Reconcile Bank Statements

Start by matching your bank statements with your accounting records. This helps catch any discrepancies like missing transactions or bank fees that haven’t been recorded. Use your accounting software to automate this where possible, but always double-check manually.

2. Verify Income and Donations

Check that all donations and income are recorded correctly. Look out for any uncashed cheques or pledges that haven’t been received yet. It’s also important to confirm that restricted funds are tracked separately from general funds.

3. Review Expenses and Payments

Go through all expenses carefully. Ensure each payment has a valid receipt or invoice. Watch for unusual or duplicate payments. Categorise expenses properly to understand where your money is going.

4. Check Payroll and Staff Costs

If your charity has employees, review payroll records to confirm salaries, tax deductions, and pension contributions are accurate. Payroll errors can cause serious issues, so this step is crucial.

5. Assess Financial Reports

Generate key reports such as the profit and loss statement, balance sheet, and cash flow statement. Analyse these to spot trends, compare budgets to actuals, and identify any financial risks.

6. Document Findings and Actions

Keep a clear record of your review process, findings, and any corrective actions taken. This documentation is valuable for future audits and trustee meetings.

By following these steps, you’ll build a solid foundation for your charity’s financial health.

Calculating and reviewing charity financial documents

What is the 33% Rule for Nonprofits?

You might have heard about the 33% rule in the nonprofit world. This guideline suggests that no more than one-third of a charity’s income should be spent on administrative and fundraising costs combined. The idea is to maximise the funds going directly to the cause.

While this rule isn’t a strict legal requirement, it serves as a useful benchmark for donors and trustees to evaluate efficiency. Spending too much on overheads can raise concerns, but spending too little might mean the charity is underinvesting in essential support functions.

When reviewing charity finances, it’s helpful to calculate your overhead ratio:

• Add up all administrative and fundraising expenses.

• Divide this by total income.

• Multiply by 100 to get a percentage.

  
  

If your charity’s overhead is close to or below 33%, you’re generally in a good position. However, context matters. Some charities may need higher overheads to deliver complex services effectively.

Using QuickBooks to Simplify Your Charity Accounts Review

QuickBooks is a fantastic tool for small charities looking to streamline their accounting. It offers features tailored to nonprofit needs, such as tracking donations, managing restricted funds, and generating customised reports.

Here are some tips to get the most out of QuickBooks during your charity accounts review:

• Set up classes or tags to separate different projects or funding sources.

• Automate bank feeds to reduce manual data entry.

• Use memorised transactions for regular payments like rent or utilities.

• Run donor reports to keep track of contributions and gift aid.

• Schedule regular backups to protect your data.

  
  

By leveraging QuickBooks, you can save time and reduce errors, making your charity accounts review more efficient and accurate.

Building Confidence Through Regular Reviews

Regularly reviewing your charity’s finances builds confidence for everyone involved. Trustees can make informed decisions, donors feel assured their money is well managed, and you gain peace of mind knowing your records are accurate.

If you’re new to this process, start small. Schedule monthly or quarterly reviews rather than waiting until year-end. Over time, you’ll develop a rhythm that fits your charity’s needs.

Remember, a thorough charity accounts review is not just about compliance. It’s about telling the story of your charity’s impact through clear, honest financial management.

Taking the Next Step in Charity Financial Management

I hope this guide has given you practical ideas and encouragement to take control of your charity’s finances. Whether you’re managing accounts yourself or supporting others, a comprehensive review is a powerful tool to ensure your charity thrives.

If you want to deepen your skills, consider training in QuickBooks or nonprofit accounting. The right knowledge and tools will help you feel confident and achieve better financial outcomes for your charity.

Keep up the great work, and remember - every careful review brings you closer to making a bigger difference!