Being a treasurer

Being a treasurerAn effective treasurer is a vital part of running a community organisation. But taking on the role is a significant responsibility, with even the smallest organisations facing financial red tape and tax regulations.

A methodical approach to record-keeping is essential, and will help you through most of the day-to-day business of being a treasurer. For the more complex issues such as annual returns and tax, help is often freely available.

Get organised

Manage routine income and expenditure

Financial planning and control

Annual report and accounts

Deal with taxes

Get help and support

1. Get organised

Make sure the organisation has its own bank account

  • You must keep the organisation’s finances completely separate from your personal finances.
  • To protect against fraud, you should require that any withdrawals (eg cheques), or withdrawals above a set threshold, are signed by at least two authorised signatories.
  • Most organisations appoint key individuals within their members or trustees on the management committee (eg treasurer, chairperson, secretary) as authorised signatories. It makes sense to have more than two authorised individuals in case one person is not available (eg on holiday).
  • Consider whether you are going to want the convenience of online or telephone banking, and if so how authorisation will work.
  • If the organisation has significant cash balances, you should open a savings account as well to earn extra interest.

Decide how financial record-keeping will be handled

  • In most small organisations, the treasurer keeps the financial records.
  • Record-keeping and reporting requirements are more complex for registered charities and for companies.
  • If you have no financial experience, you will need to get help and support.
  • You can delegate record-keeping (eg to a volunteer, or to a paid bookkeeping service). As the treasurer you would still retain responsibility.

Set up a bookkeeping system

  • Unless your organisation has very simple finances, accounting software is usually the best option.
  • Most small organisations find that a package designed for running a small business is suitable. Organisations with more complex finances may need specialist software.
  • Registered charities can get donated software for a small administrative fee from Tech Trust.

Establish what your role is and what authority you have

  • The treasurer typically has primary responsibility for all financial issues.
  • Check what the organisation’s own rules are and what the legal position is.
  • Normally, the management team should authorise you to handle routine transactions - for example, ordering supplies or paying the phone bill - up to a set limit without consultation. Larger transactions would need specific authorisation before you could go ahead.

Make sure the organisation is properly insured

  • Low-cost insurance is available for most community organisations, either from insurance brokers or through national support organisations.

2. Manage routine income and expenditure

Collect and bank income

  • Issue invoices for any money you are owed. Keep track of unpaid invoices and don’t be afraid to chase any overdue payments.
  • Issue receipts for payments received as required.
  • Record the details of any payments received as soon as possible. If you leave it until later, you may forget what the payment was for.
  • If you receive significant payments in cash, ensure that the cash is held securely and banked as soon as possible.
  • Regularly bank cheques and cash. Keep details on the paying-in slip counterfoil and in your bookkeeping system.

Pay routine bills

  • Ask for a proper invoice before paying a bill and a receipt for any payments made without an invoice.
  • Keep track of purchases made on credit and make payments before they are overdue - usually within 30 days. Otherwise you may be asked to pay interest on the outstanding balance, or have your credit facility withdrawn.
  • Simplify dealing with regular expenses by setting up direct debits or standing orders.
  • Write the details of cheque payments on the counterfoil and record the payment in your bookkeeping system.

Set up a system for dealing with small purchases

  • The simplest approach is to make small purchases out of your own pocket and then reimburse yourself, and to allow other members of the management team to do likewise.
  • Make sure everyone knows what purchases they are allowed to make, what expenses they can reclaim (if any) and what receipts they need to provide.

If you have any paid employees, set up a payroll system

  • You must operate PAYE to deduct National Insurance and income tax payments. You can use a payroll service to handle this for you, or accounting software that includes payroll functions.
  • You must operate PAYE for anyone who does paid work for you, unless they are a company (which you can pay as a supplier) or genuinely self-employed.

Keep track of any assets (eg equipment or property) the organisation owns

  • Record any purchases, sales or write-offs.
  • Make sure the assets are only used for the purposes of the organisation, not for anyone’s personal use.

Keep accurate records

  • Record details of payments, receipts and other transactions as soon as possible, before you forget what an individual transaction was.
  • Fill in details on your paying-in and cheque book counterfoils, as well as in your bookkeeping system.

Reconcile your bank statements regularly

  • Reconciling your bank statement involves checking that your bank statement matches your bookkeeping records.
  • The difference between the bank balance and the balance in your records should only reflect timing differences (eg an invoice shown in your records but not yet paid).
  • Any other discrepancies usually reflect items you forgot to record or were unaware of: for example, direct debits that you have not yet seen the invoice for, or interest credited to your account.
  • Reconciling your statements frequently (eg monthly) makes it easier to track down any errors.

3. Financial planning and control

Keep an eye on your cash flow

  • As a minimum, regularly check your bank balance and any significant inflows or outflows of money expected in the next few months.
  • Move excess cash to your savings account.

Ideally you should produce a budget

  • The budget forecasts expected income and expenditure over the coming weeks and months.
  • Budgeting helps give you early warning of any potential financial shortage, letting you alert the management team and take action before it is too late.
  • Budgeting is particularly important if your income and expenditure is variable or you have little spare money to cushion any financial blow.
  • You can base your forecasts on past experience, after taking into account any changes you expect (eg new sources of income or increased costs).
  • Some bookkeeping software includes budgeting functions.

Take a prudent approach to financial management

  • If you are unsure, base your forecasts on low estimates of likely income and high estimates of expenses.
  • Aim to build a reasonable financial cushion to help you cope with any unexpected expenses.
  • You may also want to build up funds towards planned expenditure or to help you qualify for grants that require match-funding.

Make regular financial reports to the management team

  • Comparing figures to the equivalent figures from the previous year often helps to highlight important changes - for example, if one type of income has fallen unexpectedly.

Look for opportunities to improve your financial position

  • Opportunities include donations from supporters or membership subscriptions, grants, sponsorship or generating your own income through trading activities.

4. Annual report and accounts

You should prepare annual accounts, giving a clear picture of the organisation’s financial position

  • You may want to get professional help, though bookkeeping software can produce most of what you need, largely automatically.
  • You will need to produce a statement of income and expenditure, summarising the main categories of income and expenditure over the year. If you are a registered charity, you must produce your accounts in a specified format - the Statement of Financial Activities (SoFA).
  • The statement of income and expenditure needs to be adjusted to take into account timing differences (eg bills that have not yet been paid) and any depreciation (ie the fall in value of assets owned by the organisation).
  • You will also need to produce a balance sheet, summarising the assets owned by the organisation and any liabilities (eg debts).

You should have your finances independently examined

  • An independent examination can help identify any weaknesses in your systems, and reassures everyone that everything is in order.
  • Some donors will only support organisations that can provide accounts that have been independently examined.
  • Registered charities and larger organisations are legally required to have a formal independent examination, or in some cases an audit by a registered auditor.

You will normally present your annual accounts to the organisation’s annual general meeting

  • The accounts are accompanied by a financial report. A good report will summarise the financial position and highlight any key issues in language that is easy to understand.

You may need to provide copies of your accounts to various organisations

  • Registered charities must provide their accounts, together with other specified information, to the Charity Commission.
  • Limited companies must provide an annual return and accounts to Companies House.
  • Key donors may want to receive a copy of your accounts.
  • If you are subject to corporation tax, you will need to provide accounts to HM Revenue & Customs (HMRC).

5. Deal with taxes

You must retain proper financial records

  • If you are subject to taxes, retaining financial records is a legal requirement.

You must pay the business rates charged on any premises

  • Local authorities have the discretion to reduce rates by up to 100% for community organisations.
  • Registered charities are entitled to an automatic reduction of 80% in their rates.

You must file a corporation tax return and pay any tax due if required

  • Even not-for-profit organisations may be required to pay corporation tax.
  • Charities are generally exempt from corporation tax, though corporation tax may be payable if the charity raises funds from trading activities.
  • Other community organisations are more likely to be required to pay corporation tax. Although donations are not taxable, profits from trading and interest on savings generally are.
  • If you need to file a return, HMRC will normally send you one - but it is your responsibility even if they do not.

You must register for, charge and account for VAT if required

  • Provided that your total income is below the threshold (£85,000 since 1 April 2017) you are not required to do this.
  • If your income (excluding donations and some other exemptions) is above the threshold, you will be subject to VAT.

If you have any paid employees, you must operate Pay As You Earn (PAYE)

  • You work out what tax and National Insurance contributions are due, and deduct these before paying employees.
  • You report payments and deductions to HMRC, and pay HMRC what you owe.

6. Get help and support

Arrange any information or training you need

Consider delegating tasks to other volunteers to share the workload

  • For example, you might set up a separate group to investigate fundraising opportunities or organise a fundraising event.
  • You may be able to delegate responsibility for bookkeeping to somebody else - for example, if someone is better qualified to act as bookkeeper but does not want to be part of the management team.
  • You may be able to find a local support organisation for community organisations in your area through NAVCA.

Make the most of free professional help

  • Unless you are experienced, you are likely to need help preparing annual accounts.
  • You may be able to get free help from an experienced accountant through icaewvolunteers.com.

If necessary, pay for support services

  • Local bookkeeping services can be relatively inexpensive.
  • You will usually need to pay for a formal independent examination or audit. If you only need an informal check, a friendly accountant (eg a personal friend or a supporter) may do this free.
  • Find affordable support for charities from a community accountancy service.

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