Financial Reports

Basic Notes

Whatever system you have for keeping your accounts, one of the most important aspects is the information that goes to the Directors or Trustees. All the Members are responsible for controlling the money and making the decisions on the activities of your organisation. If you do not receive good information, you cannot do your job properly as Management. There is no single rule for financial reports to the Committee, as each organisation will have its own needs. Some may have a Finance Sub-committee, which will have the time to look at more detail than the full Committee. It is up to the Committee to decide the information that it requires.

However, the main reason for receiving the reports has to be that the Management needs, to look forward to see if it needs to take any action. A report may also be required for Funders. If possible, the report should be designed in a way that meets all your needs in one go. You do not want to have to spend time producing different reports for different purposes.

This is not sufficient and should not be accepted by the other Members of the Management. It can lead to rumours that something funny is going on, even if there isn’t. More seriously, there is no way that the Management can properly control the finances and make informed decisions.

What level of detail is required?

Any Management member will know that financial reports, which are too detailed, are almost as bad as those with too little information. For example, figures should be rounded up to the nearest £. The more digits there are on the page, the less clear the report, and, at the level of the Management, pennies are not 'material'. The financial report should answer questions not raise them. There should always be written comments to explain the importance of the numbers

One major issue to decide is the basis on which the report is presented. For most organisations, a simple report prepared on a ‘Receipts and Payments’ (or ‘Cash’) basis is fine. Others may wish to have a more complex ‘Accruals’ based report (this involves adjusting the numbers for things like liabilities and debtors, making provisions etc.). For most organisations a simple record of what's come in and what's gone out is sufficient.

Another issue is to consider whether to include all your headings or categories, or whether to group some of them together. For example, you could report separately for salaries, pension and Inland Revenue payments, or you could group them together under staff costs.

Reports for different parts of the organisation

Many organisations will need to produce reports, which show the results for a particular section of their organisation. This may be a separate House or Project, or some form of Restricted Fund. These reports should be prepared in the same way as the overall report. Where costs are shared between a number of projects, these may have to be apportioned.

Key Points about Reports

* Make sure each person understands them - use whatever language you like.
* The information must be relevant and timely.
* Too much detail provided too often may hide what is really going on.
* The main focus has to be forward looking.
* The report compares what actually happened to the ‘plan’ agreed by the Management.
* One page of numbers and one of comment - anything over two sides is too long!
* Producing reports every 3 months is a good rhythm to aim for.
* The figures should be cumulative for the year to date.
* Watch out for the need to account separately for 'restricted' funds .
* Notes should explain reasons for any major differences between actual and budget .
* The notes should also give a general conclusion to guide the Management and point out any decisions, which should be taken.