Financial matters
Knowledge Center: Financial Matters
Knowledge Center: Financial Matters
Financial management for small organizations
You don’t need to be an accountant to manage a volunteer organization’s finances effectively. However, a bit of structure is essential—especially if you receive grants or rely on donations. This article helps you get started.
You don’t need to be an accountant to manage a volunteer organization’s finances effectively. However, a bit of structure is essential—especially if you receive grants or rely on donations. This article helps you get started.
The basics: separating financial flows
Always use a separate bank account in the organization's name. Mixing personal and organizational finances is asking for trouble—whether during an audit, a dispute, or a change of board members.
Creating a budget
A budget is an overview of expected income and expenses for a specific period, usually a year. It isn't a forecast that will turn out perfectly; rather, it is a tool to help you make decisions and adjust course as needed.
Include the following in your budget:
- All expected income (grants, membership fees, donations, activity fees)
- All expected expenses (rent, materials, volunteer reimbursements, insurance, communication)
The difference represents the projected result. If it’s negative, you’ll need to cut costs or find additional sources of income.
Keeping a cash book
Track what comes in and what goes out. You can do this in a simple spreadsheet—there’s no need for expensive accounting software. Record every transaction with the date, amount, and a description.
Keep your receipts and bank statements, too. Grant providers may ask for an account of your spending, and you need to be able to prove what you spent.
Annual financial statement
At the end of the year, prepare an annual financial statement: an overview of actual income and expenses. Compare this with your budget: where were your estimates accurate, where did you deviate, and why?
This statement is the document you submit to grant providers and have approved by your board. Ensure it is accurate and easy to understand.
The role of the treasurer
The treasurer manages the finances, but that does not mean they are on their own. The board bears collective responsibility; the chair and secretary must also understand and monitor the financial situation.
A good practice: the treasurer provides the board with a brief update every quarter, rather than waiting for the annual report.
Internal control
Always have financial records checked by a second person. For small organizations, this does not necessarily require a formal audit committee, but the "four-eyes principle" helps prevent both errors and mistrust.