Transform your charity financial reporting

Published by Lucy Hammond on 4 November 2019

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The introduction of Making Tax Digital and the need to have accurate real time information by a number of trustees has meant an increase in the adoption of cloud-based accounting packages.

Traditional accounting software packages are often used by charities even though they are not designed specifically for the sector. This has caused issues across the sector, such as:

  • Restricted income and expenditure are not accounted for separately and analysis of restricted funds is frequently provided via spreadsheets.
  • Management accounts are run outside of the accounting system and require analysis to be produced by the charity finance team. As a result, the information provided to Trustees is often out of date by the time they receive it.
  • Reporting on grant spending can be time consuming, as detailed reports on a specific grant often cannot be obtained.

However, cloud-based packages are now offering an alternative. Although they have been written with small businesses in mind, they have many features that charities can benefit from that will not only improve their reporting but also save the finance team time and provide accurate real time information to trustees.

In addition, the cloud is one of the most secure ways to store information. All information is stored safely offsite meaning access to your accounting records is via an online account that can be accessed on any device rather than only from your hard drive. This also means that your accounting data can be viewed by those that you give access to, and you can control that level of access. For example, a Trustee could be given a read only access meaning that they can review the accounting information at their convenience without being able to amend the data.

A charity client recently moved from Sage to Xero and the benefits of doing so have been great and include:

  • More up-to-date accounting records;
  • The part time bookkeeper can work from home saving travel time and costs, and the Chief Executive can log in and review the figures whenever and wherever she is;
  • The bank feed has meant that less time is spent posting transactions – once you have posted a transaction once, Xero suggests that you post this to the same place next time;
  • The Trustees receive the management reporting that they want;
  • Back-ups no longer need to be taken or held somewhere secure off site.

However, one of the real successes has been with the use of tracking categories which the charity is using to allow reporting on a project-by-project basis. Trustees receive an income and expenditure account for each project and can therefore review the activities of the charity from a more strategic viewpoint which enables better decision-making. These tracking categories could be used for a particular grant, for example, which would make reporting to the funder quicker internally. Or they could be used to reflect each restricted fund.

Xero also enables the user to customise reports to put each tracking category into a column to easily review the results of the project. Xero’s customised reports are easy to set up and can be tweaked to your charity’s requirements. Many of our charity clients use Excel to prepare the management accounts, some with a direct link from the accounting software. But studies have found that spreadsheets contain errors – in fact a study by the University of Hawaii found that 88% of spreadsheets contain errors! Plus, setting up spreadsheets that work and provide the information that you want takes time – planning, writing and implementing. But even something like setting up a new nominal code in your chart of accounts can mean a lot of work to update the management accounts if they are prepared in Excel.

If you would like a free demonstration for your Charity of Xero, or a different cloud-based package such as QuickBooks Online, please do contact your usual Kreston Reeves contact or email here.

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