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How to look after the finances for a small charity

Stewart Cork / 27 July 2016

With a little know-how and discipline, almost anyone can manage the finances of a small charity.

A man with a calculator updating the accounts for a small charity

Many of us volunteer for a small charity in our free time. We will often pay a man in a suit with a calculator (otherwise known as an accountant) to help us with our finances and reporting.

But with a little know-how and discipline, almost anyone can manage the finances of a small charity. That way, you’ll save money which can then be spent on helping more people, looking after more animals or supporting more of whatever worthy cause your charity embraces.

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Reporting requirements

It’s important to know what reporting requirements your company needs to comply with before you start thinking about what you’ll need to do.

Small charities have much less onerous reporting requirements than large ones, and if your charity has income of less than £25,000 each year, you will only need to fill in an annual return rather than filing full annual accounts.

And if you have income of under £10,000 you will even be able to skip large sections of this return.

The government provides a guide to what you will need to submit. If you go to and answer a few simple questions, then they will tell you what your reporting requirements are.

However, even if you don’t need to file annual accounts, it’s good practice to act as though you do, and record all transactions to the level required to file full accounts.

By doing this, you’re able to see where your money is coming from and where it's going. 

If your charity only deals with small amounts of money then every little helps, and if you can work out a way to save slightly on some costs or work out your most profitable methods of fundraising, then it could have a significant impact on the effect your charity can have on the community.

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There are two goals of recording your transactions. 

One is for the formal annual returns that you need to complete. The other is for internal purposes to help in decision making.

The items you’ll need to record vary from charity to charity. You might want to know exactly who each individual donation has come from so that you can target your biggest donors when you need to raise extra funds. 

Or you might want to be able to classify your expenditure by item to the penny, so that you can calculate whether it’s possible to save on your expenditure.

If your charity has any previous sets of accounts, then these would be the best place to start. 

It will also be useful to look at the accounts of other similar charities to see what they report, and if you know anyone involved in another charity, it might be handy to invite them over for a cup of tea to discuss the issues they encounter in preparing their accounts.

As a guide, it’s a good idea to record everything in as much detail as possible. If you decide to consolidate items in the future it will be easier to do that than it will be if you realise you need to ungroup an item and analyse it in more detail after the event.


To record your transactions, you probably won’t need anything more expensive or complicated than Microsoft Excel, which usually comes bundled free with most new PCs or laptops.

Whilst you could use pen and paper, calculations will take a bit longer to reconcile; however, if you have a small number of transactions or aren’t feeling confident with IT, then it is probably the quicker and easier option.

If you chose to use Excel, there are guides on YouTube which will talk you through how to set up a simple accounting system.

Year End

Every organisation has a financial year. Often this will coincide with the banking year which runs April to March but it is not necessarily so. If you have a choice, having a year-end in March might save you some additional admin work.

You will need to report your accounts or annual return within 10 months of your year end to avoid a fine. If you forget, you will likely be sent a reminder. As long as you are organised and have everything under control, there is little reason why you won’t be able to submit it many months before the deadline.

Charities generally do not need to pay tax but you are able to claim back some tax as gift aid if you have taken donations. Tax is generally the most boring part of any set of accounts; however, when you are only going to benefit you might feel like you are getting one up on the tax man - at that point it becomes a bit more interesting!

What is gift aid?


One of the most frustrating things in preparing company accounts can be having them audited. The goal of an audit is the important practice of giving assurance that the accounts reflect a true and fair picture of the position of the company. Unfortunately in reality, it can be time consuming and you will often answer the same questions repeatedly.

Charities with income under £25,000 will avoid the need for an audit unless your governance policy requires it or the Charities Commission requests you to perform one.

If you don’t have to complete an audit, it would be good practice to periodically share your accounts with others, especially other members of your charity’s governing body, for them to review to allow you to spot any errors or discrepancies. They may also suggest changes to your reporting which might provide them with additional information for decision making.

The keeping of accounts should be a collaborative process for everyone involved in the charity and whilst one person should be designated to oversee them, everyone should have an understanding of the financial position of your charity, so you should provide them with regular updates on how it is performing.

More information

Almost all areas of business have their own Statement of Recommended Practice (SORP) which gives guidelines on what your reporting should look like. The Charity SORP can be found at and can be downloaded for free.

The opinions expressed are those of the author and are not held by Saga unless specifically stated.

The material is for general information only and does not constitute investment, tax, legal, medical or other form of advice. You should not rely on this information to make (or refrain from making) any decisions. Always obtain independent, professional advice for your own particular situation.