Financial Governance
Lasting financial resilience starts with good financial governance. All Trustees are jointly and collectively responsible for ensuring the charity’s money is safe, well-managed, and properly accounted for. This can feel daunting at first. However, the Charity Commission’s guidance, Managing Charity Finances, sets out five core financial duties to kick us off. This is a great starting point for newer Trustees. We recommend starting here and using the checklist below to reflect on your own practice. Managing Charity Finances is part of the Charity Commission's Trustee Finance Toolkit. This is an excellent resource and is your go-to for all things financial governance. We strongly recommend that you bookmark it, share it with all key decision makers and use it to support your financial stewardship.
Protect the money
We have a set of financial controls, we monitor them and we review at least annually.
Manage payments to trustees
We have a register of interests, we have a written policy, we record and manage conflicts of interest.
Keep good financial records
We have a simple bookkeeping system that is maintained regularly, including all relevant paperwork, and which tracks restrictions and reserves.
Know the financial position
We set a budget and monitor it, we raise mission-aligned funds, and we have implemented a risk-based reserves policy.
Manage financial difficulties
We monitor whether we are a going concern - and know what to do when we might not be. We take professional advice when needed.
Financial Management
Every charity has a finance cycle; a set of regular processes that it uses to plan, manage, and review the numbers. The exact nature of your finance cycle will depend on various things such as your annual income, your activities and how you raise money but most, if not all, will involve setting a budget, monitoring income and tracking spending throughout the year, and will have processes for reviewing and reporting on financial performance. Along the way, leaders use this information to make decisions, respond to challenges, and adjust plans where needed. As a start point, we recommend reading our own Introduction to Charity Finance for Small Charities and using the checklist below to reflect on your own practice. For a deeper dive and a great read on charity finance, we recommend It's a Nightmare with the Numbers, Caron Bradshaw, Chief, Charity Finance Group.
Our finance cycle
We prepare and approve an annual budget.
Bookkeeping is done regularly (at least monthly).
We maintain an up-to-date cashflow forecast.
We hold a short, focused monthly financial review to review our budget, any variances and what is coming up.
Our year-end and audit/independent examination process runs smoothly.
We review long-term reserves and resilience at least once a year.
Financial Resilience
Financial resilience is the ability to navigate uncertainty and adapt plans, resources and activities without losing sight of purpose. Resilience is often thought to be having reserves. These are important, of course, but there is so much more we can do to build our financial resilience, even when the numbers go against us. Financial resilience is the capacity to flex in response to external pressures: sometimes expanding when opportunities arise, sometimes contracting so you can stabilise and grow again later. Financial resilience isn't, therefore, about having ever-increasing funds; it's really much more about how you manage uncertainty and change. We recommend reading Lloyd Bank's Foundation's Introduction to Organisational Resilience and using the checklist below to reflect on your own practice.
We anticipate the financial future with a 12m rolling cashflow forecast
We prepare for financial uncertainties by building sufficient reserves to manage our key risks
We build adaptability by having a plan A and a plan B
We are responsive and use red flags so that we know when to change plans
We are able to expand in times of abundance and contract in times of scarcity in a mission led people centred way
Your results so far
A snapshot for your board to talk about
You've answered 0 of 16 questions. Scores are out of 10 and shown as a percentage.
0% complete
How you're doing
Average score for each area.
For trustees, leaders and teams
Opportunities to grow
A self-assessment is at its best when it sparks a conversation. Take a moment with your fellow trustees and colleagues to look through the results together and agree where to focus next.
This area scored 0/100 — the lowest of the three. Pick one or two questions here to act on before your next board meeting.
Talk it through together. The difference in responses is often where the true insights lie. Where is there potential for your charity to enhance its financial stewardship? Where is your charity strong? Where is there an opportunity for improvement? What would move a lower score up a notch? Who will own it, and by when? The good news is that no single charity comes - and stays - fully formed. We are all constantly reviewing and improving our financial governance, management, and resilience-building. For more great finance resources designed especially for all accidental finance heroes in smaller social purpose organisations, please visit www.embracefinance.org.uk. We look forward to our paths crossing soon :)