Many businesses use management accounts when it comes to managing their finances and improving their bottom line – but even not-for-profit organisations and charities can benefit from regular management accounts.

In order to deliver on your strategy and ensure you have the funds to continue your charitable work, you need to stay on top of your cashflow, profitability, and overall financial performance throughout the year. 

Done properly, management accounts will keep you regularly updated on your finances, aid your budgeting and decision-making, and help you manage your finances more effectively, enabling you to keep your charity running successfully.

What are management accounts? 

Management accounts are like year-end accounts, but they are produced for the benefit of the Board of Trustees and other stakeholders, rather than to comply with legal requirements.   

They will contain different information depending on the size of your charity, your sector, and the kind of work you do, but they will normally contain:  

  • A Balance Sheet.
  • A statement of financial activities. 
  • Specific data requested by the individual.  

For example, you can request an expense report to identify whether expenses are reasonable or not.   

Unlike year-end accounts, monthly or quarterly management accounts don’t have to contain all the key financial information regarding your charity.   

Instead, these accounts should focus illustrating how well your charity’s finances are performing and be tailored to individual requirements.  

Why should my charity produce management accounts?  

Without secure finances, your charity’s overall effectiveness will be limited.

After all, you cannot best serve your local community if you don’t have the funds to support your work.

Management accounts are useful for identifying where your charity is making or losing money throughout the year.

With key financial information to hand, you’ll be better able to identify areas to cut costs and make sure your funds are focused on the work that matters most.    

To make sure you only use the necessary data and streamline your report, focus on one goal – for example, on growing revenue from paid products, or on reducing expenses.

Remember that you don’t have to spend a lot of time and effort on a formal presentation. A quick call with your stakeholders may be sufficient for a small charity with fairly straightforward accounts. 

Start by producing management accounts monthly and including only the essentials.

Once you’ve mastered the basics, you can build from there to produce more tailored accounts based on the needs of your charity, the Board, and stakeholders.

Do I have to produce management accounts? 

Management accounts are not mandatory, and many small charities don’t produce them at all.

This could be due to:

  • Time – Many small charities rely on every minute of every member of the team to succeed, so they may lack the time to produce these accounts in-house.
  • Cost – Charities may perceive producing management accounts to be costly or to take time away from income-producing work.
  • Misinformation – It is a common misconception that management accounts are highly complex or inaccessible to non-finance professionals.
  • No formalised system – Small charities may lack a formal accounting system which makes it easier to access ongoing financial reporting.

However, management accounts are hugely beneficial, since you’ll be able to see how your charity’s finances are performing and make adjustments throughout the year.

If you don’t have the time or resources to produce management accounts in-house, an experienced accountancy firm can offer accessible and affordable accounts services.

We’re proud to have specialist expertise in charity accounting, enabling us to provide the very best financial support.

With our experts by your side, you’ll be able to focus on the core principle of your organisation – helping others.

If you would like help with your management accounts, please contact a member of our team today.