How do you manage your association's cash flow?

Managing your association's cash flow properly is fundamental to ensuring that the organisation runs smoothly and transparently, and that it is sustainable in the long term.

If you are responsible for doing your association's accounts yourself, how do you go about it? And how do you manage your association's cash flow?

In this article, you'll find the basics of good association management, advice on accounting and cash management, and a selection of tools specially designed for associations.

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What type of accounting system should an association use?

Cash flow accounting

Cash accounting (or cash receipts accounting), with its simplified procedures, is aimed at the smallest structures in the voluntary sector.

🔎 In practice:

• You keep chronological track of receipts and disbursements;
• You keep an "income-expenditure" table in which you enter your bank statements and supporting documents (till receipts, chequebook stubs, etc.). All transactions are recorded on the basis of the bank account;
• Each month you calculate the balance between income and expenditure. The result gives an account of the association's financial position.
• You regularly monitor cash movements on your bank account to ensure that they are associated with invoices.

Commitment accounting

Commitment accounting is the classic form of accounting used by commercial companies. It is recommended for large associations and compulsory for those that must comply with the provisions of the association's chart of accounts.

🔎 In practice :

• You record receivables and payables as soon as they arise ;
• You keep track of income and expenditure, as well as customer and supplier accounts;
• You draw up annual accounts and are subject to audit by a statutory auditor;
• The purpose of your bookkeeping is to report to members, partners and funders on the use of the money paid in (membership fees and donations).

Cash flow obligations for associations

Although it is compulsory for your non-profit association under the 1901 Act to keep accounts and manage its cash flow, there is no set format for presenting the accounts.

Its obligations will therefore depend on the structure: the nature of the activity, the size of the association and the sources of funding in particular.

How do you manage your association's cash position?

Cash flow refers to the money available in the association's accounts. To manage it as effectively as possible and ensure that you have sufficient working capital, you need to keep a close eye on your cash flow, month by month, as businesses do.

Forecast cash receipts

The cash receipts you need to plan for for your association include :

• membership fees
• grants
• donations
• income from sales or ancillary services
• bank loans, etc.

Forecasting disbursements

Cash outflows are essentially made up of :

• fixed costs (rent, insurance, water, electricity and internet subscriptions),
• bank charges
• wages, social security contributions and employers' contributions
• tax, where applicable,
• payments to suppliers
• payments to service providers (accountants, etc.),
• repayment of loans,
• purchase of supplies,
• expenses relating to association events,
• volunteer expenses, etc.

Keeping track of your cash flow with an association cash flow plan

To keep a close eye on your cash flow, draw up a cash flow plan. This accounting document is a forecast table:

• to be completed on the basis of cash flows from previous financial years, with a margin for caution;
• to be monitored and updated in line with actual cash flow trends;
• adjust with your new forecasts to anticipate cash flow problems.

☝️ An association's working capital requirement is generally negative, as membership subscriptions received at the beginning of the year usually cover expenditure for the coming year.

If your forecast budget is correctly drawn up at the start of the financial year, then you are less likely to have to find new sources of funding to make up for cash flow problems.

The role of the treasurer in an association

An association is run by volunteers, including a treasurer .

Although it is not compulsory to appoint one, the treasurer has a very important role to play.

Working closely with the Chairman, he is responsible for sound financial management and the proper use of the funds entrusted to him in the name and on behalf of the association.

Associathèque

They may be delegated powers, such as the power to sign for payments and access the association's bank accounts.

Depending on the size of the organisation, his/her duties may include:

• 🎯 determining the expenditure to be incurred for the smooth running of the association's activities;
• 🎯 drawing up the association's provisional budget in line with the objectives and projects voted;
• 🎯 manage and keep the association's accounts by drawing up :
  • an income statement,
  • a balance sheet, for closing the accounts each year,
  • a financial report, with details of income, expenditure and changes from one financial year to the next,
  • an account of the use of resources in the event of calls for public donations, etc. ;
• 🎯 present the association's accounts to all members at the Annual General Meeting (AGM), usually once a year;
• 🎯 f ulfilling or supervising accounting, social security and tax obligations:
  • filing returns on time
  • paying invoices,
  • filing accounting documents,
  • managing cash receipts,
  • bank reconciliations,
  • relations with banks, suppliers, government departments, chartered accountants, etc.

☝️ Depending on the size of the cash flow to be managed, staff or a chartered accountant can assist the treasurer in the (frequent) cases where he or she has no accounting skills.

Whatever the case, the treasurer is the person responsible for the association's financial control.

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Simplify cash management with Excel or a software package

Excel for monitoring an association's cash flow

Excel is the first software that comes to mind for keeping simple accounts for an association. It is not software specifically developed for bookkeeping, but a spreadsheet program.

It can meet basic needs for monitoring cash receipts and disbursements.

But for more advanced accounting, the tool lacks intuitiveness and a collaborative dimension.

In the event of an audit, the .xls file needs to be converted to a .pdf file so that it can no longer be modified, as the accounting documents must not be altered.

Take this quiz to find the right management software for your association:

The benefits of dedicated software for associations

Non-profit organisations are also entitled to tools that make managing their cash flow as easy as possible! Online accounting software for non-profit organisations offers the following advantages:

• eliminates the need for manual data entry and reduces the risk of errors ;
• it saves you a lot of time by automating tasks such as bookkeeping entries;
• real-time visibility of your cash position , thanks to constantly updated data and dashboards;
• collaborative features for working more efficiently with other members of the association;
• free or low-cost versions suitable for small organisations or those with minimal activity,

▷ Here are some examples of comprehensive management tools that include accounting and other functions:

• AssoConnect gives a quick, simplified overview of your cash flow and centralises your accounting entries. It also allows you to monitor your cash position in real time by synchronising with your bank.
  
• BAWEB (B-association) includes the ability to produce profit and loss accounts, balance sheets and budget forecasts. Up to 5 people can work on cash management at the same time.