Financial management for clubs

Financial processes a club needs to run successfully.

Information you need to manage your club's finances. Remember that the size of your club determines the financial management processes that need to be put in place.

The treasurer

The treasurer is a key person in the club's management. They are represented on the club's board or committee, and take overall responsibility for its financial management. The size of this job will depend on how big the club is and whether there are other people who can help - either with the financial administration or as a finance sub-committee. The treasurer will require a job description - this sets out what they're supposed to do and provides standards for their performance. The treasurer's role includes reporting on actual finances and seeking out the best ways to use available funds. The treasurer needs the following stationery to perform their job effectively:

• cheque books
• bank deposit books
• a cash book or general ledger
• payment authorisation (cheque requisition) vouchers
• a numbered receipt book with carbon copy page
• account forms for members' subscriptions
• a petty cash payment book and petty cash vouchers
• a file for accounts payable, that is, amounts owing to suppliers for goods and services purchased
• a file to store receipts from accounts paid
• a file of orders placed with suppliers
• a file to store bank statements.

Accounting systems and software

Usually a computerised accounting system is the easiest and simplest way to keep track of the club's accounts. There are several simple programmes or software packages available. Have a look around to see what's best for your club's needs. If the club is small enough a manual system may be sufficient. Here's what your accounting programme should be able to do:

• calculate GST and allow you to allocate it by individual transactions
• follow spending
• produce comprehensive financial accounts (profit, loss and balance)
• allow you to make necessary adjustments easily
• provide you with the information required in an easy-to-understand report form
• provide information in a clear format that everyone using it can understand clearly.

Cashbooks

A cashbook is a journal in which all of the club's receipts and payments are recorded. ‘Cash' includes actual money, credit card slips, cheques and money orders. There will be receipts and cheque butts, but the cashbook records the details of all transactions.

Bank accounts

The club will need a cheque account. Cheque books provide a simple and effective way to track the club's spending. Usually clubs have two management committee members (including the treasurer) who are authorised to jointly sign the club's cheques. Three members may be authorised, with only two required to validate the cheque. The club's bank statement also provides an accurate record of spending. You can choose the frequency of these statements.

Budgets

The club will require an annual budget. This is the responsibility of the treasurer and is agreed on by the club's management committee. Once the budget is approved, it is added into your accounting system so that it can be compared to the club's actual income and expenses. You can use either an Excel spreadsheet or a manual cashbook for the club's budget.

To prepare a budget:

• start with actual income and expenditure from the previous year - if the club is new you will have to base this on realistic estimates
• add what you know about the coming year
• adjust and modify until you have a realistic and reasonable budget
• get the budget approved by your management committee or governing body.

Cash flow forecasting

Cash flow forecasting allows you to anticipate any dips in your club's income and plan around them. If the club's income is variable, good forecasting will mean you'll still be able to meet expenses.

To prepare a cash flow forecast:

• Use historical patterns of receipts and payments to help you predict the future timing of cash flow
• Use the budget to help you anticipate the amount of the receipt or payment. Keep in mind your budget may be prepared on a GST exclusive basis and cash flow includes GST (so gross up transactions where applicable). Also, your budget may not include things like GST payments to IRD, Loan repayments or Fixed Asset purchases so be sure to keep those in mind.
• You can forecast cash flow on a daily, weekly or monthly basis
• The cash flow movements should always reconcile back to the bank statement for the period

Audits

The club's financial records will be audited from time to time. During an audit, a person independent of the club (such as an accountant) checks that the financial statements are a correct record of the financial position of the club at the time of the audit. A suitably qualified volunteer can audit the club's accounts, or it may be necessary to use a professional auditing service. This can be costly, so finding a volunteer who is willing to perform the audit is preferable.

Auditing can be a lengthy process and it is a good idea to allow six to eight weeks for an audit to be completed. Your club's auditor will need:

• the club's cashbooks, written up and balanced for the year, and journals or ledgers that the club uses for records
• bank statements for the whole year
• copies of deposit slips and cheque butts
• receipt books with duplicate and original copies, plus any unused receipt books
• vouchers for payments made by the club, arranged in numerical order
• receipts or copies of cheques paid to your club
• copies of minutes from your management meetings that show how financial decisions were made and agreed
• copies of any previous audit statements
• all financial statements for the year being audited
• any other relevant financial documents.

Insurance

It is important that the club has adequate insurance. The extent of insurance required will vary depending on the club's assets, size and activities. Given the commitment and contribution that volunteers make, it's important they are protected from any potential risks.

Accident Compensation Corporation (ACC) is New Zealand's statutory insurer for any injuries caused by accident. It provides all New Zealanders with accident protection, but many clubs are choosing additional cover to recognise the importance of their volunteers and members.

Generally you'll require policy coverage for:

• liability insurance
• fire and theft of contents
• loss of income/increased costs of work.

The choice of insurance company will depend on the policies, cover and costs that they are able to offer the club. Club members may elect to take out individual policies, or the club may select a ‘preferred supplier' who is able to tailor costs and provide cover for the club's specific needs. There are also specialist insurers who deal with sports insurance.

Tax and GST

The Inland Revenue Department provides information and a section of frequently asked questions about collecting and paying GST.

Sports clubs are often registered as charitable trusts, which are exempt from income tax. According to New Zealand law, a charitable trust must exist principally for a charitable purpose. For an organisation's purposes to be deemed charitable its activities or aims must be public purposes, that is, the benefit must be available to a large part of the community. In addition, it must not be carried on for the benefit or profit of any individual.

Charitable organisations need to be registered by the Charities Commission to enjoy the tax exemptions. The IRD website includes a section on charitable organisations with information about how this relates to tax.

More information

The IRD has more information on:

• cashbooks and general record-keeping
• tax information for charities

CommunityNet Aotearoa, an New Zealand internet resource, has lots of useful information and resources about financial planning and cash flow forecasting.

Below: Paula Browning, Business Manager, Sport Auckland talks about finance tools for clubs.