Financial management for community organisations

The management committee is responsible for the financial management of your organisation.

The treasurer is part of the management committee and not the only person responsible for your organisation's finances. The treasurer's role entails reporting and providing strategic financial advice and may also include bookkeeping. The bookkeeping component is a good role to outsource to free up the treasurer's time to focus on financial strategies, budgeting and reporting.

An accountant may be engaged by your organisation to provide financial advice and guidance.

An auditor checks whether your financial report reflects your financial operations.

• A defined set of accounting policies and financial responsibilities, including set limits on spending with relevant approval processes.
• Clear approval and ratification processes where approval is pre-expenditure and ratification is post expenditure.
• The treasurer provides bank statements to reflect the figures in the financial report to ensure transparency.
• Using a financial management system that integrates with other systems such as point of sale and online payment systems.
• Having a process on how to prevent, identify, and respond to incidents of fraud.
• Choosing secure internet banking passwords, which are changed regularly.
• Limiting the amount of cash handled on site.
• Keep good records of grant funding and use separate bank accounts to manage large grant projects.

Prepare an annual budget with the committee and key employees (if applicable). 

You may decide to establish several budgets within a master budget (e.g. operating income and expense, capital expenditure and cash budgets). 

Your organisation should monitor its progress against the annual budget and produce monthly financial reports for committee meetings.

Your organisation should have  planned maintenance expenditure to maintain your assets and a sinking fund for their replacement as they come to their end of life.

Visit Maintaining and developing community leased and licensed premises for more information on your maintenance obligations and responsibilities.

Review your fee structure annually to ensure all membership and activity fees cover the associated delivery costs. If the fees do not cover the costs, you should understand what is being subsidised and from which income sources. Income from fundraising and sponsorship should not be relied on to deliver basic services or cover facility maintenance costs.

Once your organisation is generating an annual profit, you should plan to increase your fees by at least the consumer price index each year to cover your expenses. If you organisation is not yet making a profit, look to increase your fees incrementally each year until you are.

A chart of accounts is used to group together transactions of a certain type such as sales revenue or maintenance costs. A well-structured chart of accounts allows you to produce detailed reports for specific areas of your operations and finances.

Your chart of accounts should be correct, coded, clearly labelled, simple and used consistently.

The difference between gross profit (income minus cost of goods sold) and net profit (gross profit minus all indirect costs (e.g. electricity, lease fees)).

Your organisation should operate with a profit each year. It is an organisation's profit that allows it to grow.

Your organisation needs to decide where it wants to be in terms of the level of service you provide versus cost. It's all about value.

If your organisation wants to provide a higher level of service, then this cost must be reflected in the fees you charge. It is essential you charge appropriately for the services you provide - you not only need to cover the costs of the service but also ensure you're able to continue providing the service in the future.

Operating a quality, user-friendly financial management system:

• saves time and fees
• is secure
• reduces the risk of errors and prevents the likelihood of fraud within your organisation
• allows your treasurer to focus strategic financial management
• allows connection with all bank accounts without the need for manual reconciliation
• enables integration with your online point of sale system to enable tracking of stock 
• integrates with your online payment systems.

All incorporated organisations are required to keep good financial records.

Good record keeping includes:

• a cash book or statement of amounts received and paid
• a receipt book and register of receipt books
• bank statements (with a financial institution in Queensland)
• a register of assets
• a petty cash book.

Larger incorporated organisations may also be required to use a journal and/or ledger. Speak with your accountant or auditor for more information.

Your cash book should be balanced at regular intervals (e.g. monthly) and a reconciliation made between the cash book and bank balance. This reconciliation can then be provided as part of the monthly report to the committee.

All financial records for your incorporated organisation must be kept for at least seven years after the final entry.

Consider all your operations in terms of return on investment, particularly in relation to paying employees, players and coaches. Your organisation should be able to articulate the value in each area of service delivery.

Ensure you have allocated appropriate maintenance expenditure to continue maintaining all assets.

Visit Maintaining and developing community leased and licensed premises for more information on your maintenance obligations and responsibilities.

• Your balance sheet should 'balance'. If it doesn't, what is the discrepancy?
• Does your balance sheet, including the 'cash at hand', reflect your bank statements?

• If the value of buildings owned by Council are listed as non-current assets, it can mask the true financial situation of your organisation. Ensure you review your financial position without the value of buildings owned by other parties such as Council.
• If you have built a building within your current lease term, the depreciation claimed against the building should be allocated into a sinking or facility maintenance fund.

Your total current assets should exceed your total current liabilities.

Your total current assets should far exceed your net profit (operating surplus).

• You should have detailed information on the previous year's expenditure. 
• Are there trends in expenditure over recent years? Are there any new expenses or times throughout the year when expenditure peaks and should be budgeted for?
• Have you reviewed your suppliers and contracts recently to ensure you are getting value for money?

Your organisation's financial reports should be up to date and signed. They should include the previous year's amounts on the statement and the auditor's accompanying notes.

• Does your organisation have more than one source of income? How predictable and reliable is each income source?
• Does your income peak and trough throughout the year? Your annual budget should reflect these trends and your organisation should have measures in place to deal with any low cash flow periods.
• Have you experienced any unplanned reduction in income in the past few years? If so, your organisation should determine the reasons for this change and put measures in place to address the issue or create alternate income sources.

Visit funding and income sources for more information on income sources and ways to generate more income.

• Is your organisation making a net profit or loss? What has been the trend over the last five years?
• Does your income and expenditure reflect and align with your operating activities (e.g. your canteen makes a profit and payments to coaches are appropriate)?
• Are you charging appropriate membership fees to cover the true cost of your operations? 

• Does your organisation have any outstanding debts with the Australian Taxation Office, Queensland Urban Utilities or other peak body? If so, you should have a payment plan in place to rectify the situation as soon as possible.
• Does your organisation have any personal member loans and if so, what are the payment arrangements in place, and are they registered with the Personal Properties Security Register?

Any debts owed, including those to members for loans, should have a payment plan or arrangement in place

• Does your organisation have trade debtors? Are you collecting all membership fees owed?
• Does your organisation have significant trade creditors? Are you paying your bills as required?

Your organisation should collect all income owed to it and should not be writing any unpaid fees off. Similarly, you should be paying all bills as required or have payment plans in place.

Cash should never be held or stored in large floats.