How do you track your finance? MSC Social Enterprise Year 1 Weekend 3

Jackie Scutt How do you track your finance?MSC Social Enterprise Year 1 Weekend 3

Financial accounting & Management accounting Financial accounting: Retrospective over a set accounting period A standard snapshot in time Audited Available

Financial accounting & Management accounting Management accounting: Projections A way of keeping track of your budgets Updated constantly For internal use

The 3 main financial statements How they give us different kinds of information about organisational performance:

Profit and Loss • Shows the results over a particular period, normally a year • Compares the income against the expenditure needed to create that income during that period • Grant income is normally released against expenditure associated with the grant • Income and expenditure are based on when items are invoiced, not when they are paid • Includes non-cash items such as depreciation • Adjusts for accruals and prepayments • The surplus or deficit is carried forward to the next year through the balance sheet

Format of P&L accounts • Sales • Cost of Sales • Gross Profit • Fixed costs/overheads • Operating profit • Tax and interest charges • Earnings/net profit

Balance Sheet • A summary of an organisations’ assets and liabilities, the basis for deciding if it is solvent or not • The net assets balance with the financing of the organisation • Includes liabilities i.e. cash owed to others, loans • Assets can be tangible – cash, equipment, stock, buildings – or intangible – goodwill, reputation • ‘Liquid’ assets are assets which can be converted into cash within a year

Typical balance sheet • Fixed assets (e.g. equipment) • Current assets (stock, cash, prepayments, debtors) • Current liabilities (creditors, bank overdraft) • Current assets less current liabilities = net current assets, or working capital • Fixed assets + net current assets = reserves, or equity

Issues in OSCR and accounting practice • Distinction between restricted, designated and unrestricted reserves • Allocation of income and expenditure according to charitable activities • Reserves policy • Risk mitigation • Trading income • VAT

Financial Risk • Lack of profitability • Lack of cash • Budget forecasts inaccurate • Loss of income • Increased expenditure • Lack of FCR

Task 1 • Look at the financial statements for Any Org. • What do they tell you about the organisation? • What are the strengths? • What are the risks?

Task 2 • Complete the exercise for Right On products. • What are the learning points for your own business plan?

How do you track your finance? MSC Social Enterprise Year 1 Weekend 3