Key considerations for small charities

As the sector gears up for 2017, Finance and Accounting Consultant Andy Nash, who specialises in charities and non-profits, sets out his priorities for small charities in the year ahead.

In what has been a challenging few years for charities, it has been smaller charities that have on the whole taken the hit. 2016’s Civil Society Almanac clearly shows that growth in overall income across the sector has been within a few large charities, at the expense of smaller charities. As someone who is passionate about the role of small charities which are often closer to the beneficiaries and more agile, here are my top tips and considerations for the year ahead.

 

Keep income diversification simple

One of the biggest challenges I see with clients is that their income is all focused around one stream, mainly grants and foundations which are becoming increasingly more competitive. Diversifying doesn’t necessarily require using complex and expensive strategies around selling your services to local authorities, although this may be one option. Simple things such as making sure donors can give online or via standing order, or even approaching local businesses are low-cost easy ways to at least start that diversification process. As a smaller charity you can connect with your local community on a totally different level.

 

Avoid mission drift

As the competition for grant funding increases more charities are trying to fit their objectives around an application, rather than selling their own objectives to funders, with the charities realising two years later that they are no longer meeting their core purpose. This has two outcomes. Firstly the funders see straight through it and in addition to failing at the first stage, you jeopardise future opportunities, even if they may be more relevant. Secondly, you alienate your key supporters as they no longer feel they are supporting your original objectives – don’t let larger funders push you in a direction that is not right for you.

 

Make your accounts sing!

As the media and public scrutiny of charities increases, your accounts can and should become one of your biggest assets. Regardless of the challenges of implementing the new SORP, especially for smaller charities, this is an opportunity for you to sing about your achievements, show how efficient you are, and most importantly the impact donations have had on your beneficiaries. Small charities can’t afford to spend thousands on glossy publicity, but your accounts should tell your story – don’t just use them as a legal requirement that must be met, and find an accountant who will help you tell that story.

 

Get the right ongoing support

With new regulations coming out on what feels like a weekly basis on an ever-increasing breadth of topics, and another imminent revision of the Charity SORP, it’s incredibly hard for a small team, often without a qualified accountant, to keep up. Therefore make sure you get the right support. As hard as it seems to find them, have an accountant as your treasurer and ensure they stay up to date with charity regulations – there are multiple free recruitment channels, including the ICAEW Volunteer site and CFG. If outsourcing your finance function, make sure it’s to someone who understands charities. Any other company would look for a sector specialist and you should be no different.

 

Use a good independent examiner

The same principle should apply to your independent examination. A recent review of accounts we completed for charities in our local area, showed an alarming number of those below £500,000 income who had received a clean independent examination but were not in line with the latest SORP. Don’t just go for the pro-bono option – a good independent examination should provide an annual health-check for your organisation and be an opportunity for you to make sure your financial controls are fit for purpose and help your trustees reduce the risk of fraud.

 

Remember your staff are your biggest asset

The ongoing pension auto-enrolment process is being seen as a chore and yet another drain on resources by most charities, yet it is a real opportunity to review the way you recognise the contribution your staff – without them you would be stuck! It’s far easier to get grant funders to cover pension contributions and other benefits, than wider overheads so this as an opportunity to say thank-you to your staff, it’s not just another box-ticking exercise.

 

And finally – don’t obsess about Brexit!

Without doubt there will be an impact on charities over the next months and years as the UK starts to extradite itself from the EU. What form that will take is almost impossible to tell at the moment, yet it is the key question I get asked by clients. Until we know this there is little we can do, so let’s monitor the situation and focus on what we can control!

 

Andy Nash, Andy Nash Accounting & Consultancy

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