Please note that the information in this section is not intended to be legal advice and the law can change regularly. Therefore the authors of this publication take no responsibility for the results of any action taken on the basis of information contained in this section or for any errors or omissions. Instead readers should talk to a lawyer or their local Community Law Centre for further legal advice. More detailed information on financial and tax matters can also be obtained as indicated in this section.
introduction
what's financial management?
Financial management is managing money received or spent. Doing it well is essential to any group's survival. Financial management has three basic parts to it:
- planning (on how to raise and spend money)
- record keeping
- reporting.
policies and procedures
In addition to the three aspects of financial management just mentioned, your group should also have some set policies and procedures that must be followed when it comes to looking after money. This will make it easier to keep track of the money that comes into the organisation and how it is spent.
Some areas to have policies and procedures for include:
Cash receipting:
- writing receipts for cash received – such as donations, membership fees etc
- banking cash as soon as possible after it is received
- banking all money received (i.e. don’t use it to pay for costs).
Making payments:
- pay for all purchases and expenses (except for small, petty cash items), by cheque or direct credit
- have a system for approving payments
- have designated cheque signatories and two signatures on every cheque
- have a system for filing invoices
- have a petty cash system for small payments – with procedures to balance and reimburse it.
Tip
Refer to 'Section 5 'Policies' for more detail about developing policies for your group.
what's in this section?
In this section we will cover the three aspects of financial management listed above. We will also give guidance and provide samples of financial documents for organisations using either a computer accounting package or a cash book accounting system (using either a manual or computer spreadsheet).
In addition to financial management, we cover tax matters and details on the requirements for filing annual returns and financial statements. Finally, we list some references for further information and a glossary of financial management terms.
uses of financial information
Financial information can be used by management, workers, Inland Revenue, the Charities Commission, funding agencies and the general public. It is used to assess:
- that the finances are being used well to meet the objectives of the organisation
- performance and that the work is cost-effective
- the organisation’s financial position
- all legal requirements are being met
- the extent to which planning for the future is being undertaken.
acknowledgements
The three main sources of information for this section were: Financial Training for Not-For-Profit Community Groups developed for the Auckland City Council; training supplied to not-for-profit groups by the Community Accounts Mentoring Service (CAMS); and Inland Revenue material.
Back to top