CHARITIES & NOT-FOR-PROFIT

Good Financial Management Helps Turn Limited Resources Into Greater Impact

Charities need more than year-end accounts. Trustees need reliable financial information, appropriate controls and a clear understanding of income, expenditure, funds, reserves and future commitments.

First4Accounting helps smaller charities and not-for-profit organisations establish practical financial systems, prepare appropriate financial information and understand what the numbers are telling trustees.

Good Charity Accounting Is About Accountability — But Good Financial Management Is Also About Making the Resources Go Further.

WHO WE HELP

Practical Support for Organisations With a Purpose

Proportionate accounting and financial-management support for smaller organisations, shaped around their structure, activities and the people responsible for the finances. Not every not-for-profit organisation is legally a charity; the appropriate work starts with understanding that distinction.

Small Registered Charities

Clear records, practical reporting and support that respects the time and resources available.

Charitable Companies

Accounting support that takes the company’s legal structure and charitable activities into account.

Charitable Incorporated Organisations (CIOs)

Financial records and reporting organised around the CIO’s activities, funds and applicable requirements.

Community Organisations

Practical financial information for community activity, with the organisation’s legal status considered first.

Local & Volunteer-Led Organisations

Approachable support and workable routines for trustees, volunteers and small teams.

Growing Not-for-Profit Organisations

Stronger reporting, forecasts and controls as funding, staffing and activities develop.

CHARITY ACCOUNTING

Trustees Need to Know Where the Money Came From, Where It Went and What Remains

Complete accounting records give trustees a reliable starting point for financial oversight. Income and expenditure should be supported by the relevant invoices, receipts, agreements and other documents, with bank reconciliations used to explain the movement of money.

Grants, donations, payroll where applicable and individual fund records need to connect with the accounting records. Gathering year-end information becomes more manageable when the underlying work has been kept up to date throughout the year.

Record the Activity

Explain the Position

Year-End Accounts Are Much Easier When the Financial Records Have Been Managed Properly Throughout the Year.

FROM TRANSACTION TO TRUSTEE INFORMATION

A Practical Route From the Records to Financial Control

RECORD

Capture income, expenditure and supporting information properly.

RECONCILE

Reconcile banks, funds and other relevant financial records.

REPORT

Turn the records into meaningful financial information.

REVIEW

Help trustees understand the position, commitments and matters requiring attention.

The Objective Is Not Simply to Produce Accounts — It Is to Maintain Financial Control.

START WITH THE ORGANISATION

The Accounting Requirements Depend on the Organisation

The right accounting and reporting approach depends on the legal structure, charity registration, activities, governing document and accounting period, as well as income and other relevant thresholds. Charitable companies, CIOs and trusts or unincorporated associations should not be assumed to have identical requirements.

We establish which framework and accounting basis apply, including whether accruals accounts or another permitted basis is appropriate, and whether independent examination or audit is required. Preparing the accounts and providing external scrutiny are separate matters.

Legal Structure

Understand whether the organisation is a charitable company, CIO, trust, unincorporated association or another form of not-for-profit body.

Applicable Reporting

Consider registration, activities, the governing document, accounting period and the relevant framework.

External Scrutiny

Establish any independent examination or audit requirement separately from accounts preparation.

TECHNICAL REVIEW REQUIRED BEFORE PUBLICATION — verify current Charity Commission accounting, independent examination and audit requirements for 2026/27.

CHARITY REPORTING

Charity Accounts Tell a Different Story From Ordinary Commercial Accounts

Charities preparing accruals accounts may need to follow the applicable Charities Statement of Recommended Practice (SORP). Charity reporting can explain activities, funds and the use of resources alongside conventional financial statements.

SORP 2026 applies to relevant accounting years beginning on or after 1 January 2026. Its applicability to the particular charity and reporting period must be checked as part of the final technical review before publication.

TECHNICAL REVIEW REQUIRED BEFORE PUBLICATION — SORP 2026.

KNOW WHICH MONEY CAN BE USED

Not Every Pound in the Bank Is Available for Every Purpose

Appropriate fund records help trustees understand which resources can be used for which activities. Restricted funds carry restrictions on their use; unrestricted funds are available for the charity’s general purposes, subject to its governing framework and commitments.

Designated funds are amounts trustees have set aside from unrestricted funds for particular purposes. Endowment funds may require separate consideration where relevant. Restrictions can arise from the terms on which money or assets were provided, so the supporting records matter.

The correct classification and accounting depend on the facts and applicable framework. We do not provide legal interpretation of individual grants, trusts or governing documents; specialist advice may be needed.

Restricted Funds

Identify the relevant purpose and terms, and track the related income, expenditure and remaining balance.

Unrestricted & Designated Funds

Distinguish resources for general charitable purposes from unrestricted amounts trustees have set aside for particular plans.

The Bank Balance Alone Does Not Tell Trustees How Much Money Is Freely Available to Spend.

GRANTS, DONATIONS & FUNDING

Understand the Conditions Attached to the Money

Grants, donations, fundraising income and contracts or service income can come with different terms and expectations. Restricted funding and reporting to funders need to be understood alongside the activities the money is intended to support.

Matching expenditure to the relevant project or fund can help explain how resources have been used. Income recognition and fund classification depend on the nature and terms of the funding and the applicable accounting framework; a bank receipt alone does not settle the accounting treatment.

We review the underlying information before reaching accounting conclusions. Questions requiring interpretation of legal agreements should be referred for appropriate legal advice.

PLAN THE RESOURCES

A Charity Can Have Funds on Paper and Still Face a Cash-Flow Problem

An annual budget and a cash-flow forecast answer different questions. The budget helps plan income and expenditure; the forecast helps trustees consider when money will arrive and when commitments need to be paid.

Payroll, premises and project expenditure need to be considered alongside grant timing, fundraising, capital expenditure and future commitments. Restricted money and timing differences can make the headline bank balance misleading.

A forecast can help trustees examine assumptions and identify potential pressure points. It cannot remove uncertainty or guarantee that cash-flow problems will be avoided.

Cash Flow Matters in a Charity for Exactly the Same Reason It Matters in a Business — Bills Have to Be Paid When They Fall Due.

FINANCIAL RESILIENCE

Reserves Need a Reason — Not Just a Number

Trustees should consider why reserves are held and how the level relates to the charity’s risks, commitments, income profile and future plans. Operating needs, uncertain income and unexpected expenditure may call for different considerations from a planned project.

Restricted funds, designated funds and other commitments need to be understood when explaining the resources available. We can help prepare financial analysis and scenarios to support the trustees’ discussion; the policy remains a matter for trustees to consider and approve.

The policy should explain the reasons for holding reserves and how trustees will review their level as circumstances change.

A Sensible Reserves Policy Should Reflect the Charity — Not Somebody Else’s Rule of Thumb.

USEFUL TRUSTEE REPORTING

Trustees Cannot Govern Well if the Financial Information Arrives Too Late to Use

Practical management reporting can bring actual income and expenditure together with budget comparisons, the cash position and restricted and unrestricted fund balances.

Project performance, significant commitments, relevant debtors and creditors and emerging financial risks may also need attention. The right frequency and detail should be proportionate to the organisation and the decisions trustees face.

We aim to make the financial position understandable, with clear questions and matters for review rather than a collection of unexplained figures.

The Objective Is Useful Information — Not Producing a Large Finance Pack Nobody Reads.

PROTECT THE CHARITY

Good Controls Protect the Money — and the People Responsible for It

Payment authorisation, bank access, expense approval and reconciliations deserve clear arrangements. Payroll checks, supporting documentation, review of unusual transactions and access to accounting systems also help make responsibilities visible.

Segregation of duties is useful where practical, but a very small organisation may have limited personnel. Controls need to reflect that reality, with proportionate review and oversight rather than procedures the team cannot operate.

We can help review financial routines and identify practical improvements. Controls can reduce risk, but they do not guarantee the prevention of fraud or loss.

Authorise & Document

Reconcile & Review

PAYROLL, PENSIONS & PEOPLE

Employing People Brings Responsibilities Beyond the Charity Accounts

Payroll, PAYE and workplace pensions need appropriate attention alongside the charity’s accounts. Starter and leaver information, statutory payments where applicable and complete payroll records all form part of the practical work.

The scope and responsibilities should be agreed around the organisation’s staffing arrangements. First4Accounting’s Payroll & Workplace Pensions service can provide separately scoped support.

CHARITIES ARE NOT OUTSIDE THE TAX SYSTEM

Charitable Status Does Not Mean Every Transaction Is Automatically Tax-Free

Charities can encounter VAT, trading activities, Corporation Tax considerations, Gift Aid, payroll taxes and property transactions. The treatment depends on the activity and circumstances; charitable status should not be treated as a blanket answer to every tax question.

We can help identify the accounting and tax matters that need attention within the scope of our competence. Specialist VAT, tax or legal advice may be needed in more complex situations.

TECHNICAL REVIEW REQUIRED BEFORE PUBLICATION — verify current HMRC charity tax, VAT and Gift Aid guidance.

ANNUAL ACCOUNTS & TRUSTEES' ANNUAL REPORT

The Accounts and Annual Report Should Help Explain What the Charity Has Done

The financial accounts and trustees’ annual report work together to explain the charity’s activities and its use of resources. Activities, achievements, the financial review, reserves and future plans where appropriate can provide context for the figures and support public accountability.

The precise reporting requirements depend on the charity and applicable framework. We can help prepare financial information and support the reporting process under an agreed scope, while trustees retain responsibility for their report and its approval.

ANNUAL RETURN & CHARITY COMMISSION

Keep the Charity's Public Record Up to Date

Registered charities may have annual reporting and submission obligations to the Charity Commission, depending on their circumstances. Accounts, the trustees’ annual report, an annual return and any applicable external-scrutiny report need to be considered together.

We can help identify the information needed and support preparation under an agreed scope. The current filing requirements must be checked for the particular charity and period.

TECHNICAL REVIEW REQUIRED BEFORE PUBLICATION — verify current Charity Commission filing requirements.

EXTERNAL SCRUTINY

Independent Examination and Audit Are Separate From Preparing the Accounts

Depending on its legal structure, size and circumstances, a charity’s accounts may require independent examination or audit. Establishing the appropriate form of external scrutiny is separate from agreeing who prepares the accounts.

Accounts-preparation support from First4Accounting should not be taken as an offer of statutory charity audit or a commitment to act as independent examiner. Any independent-examination engagement would require separate confirmation that it is professionally appropriate, with the necessary independence and eligibility for that particular engagement.

Where examination or audit is required, suitably qualified or eligible professionals must be used where required. Trustees should establish the arrangements early so preparation and scrutiny responsibilities are clear.

Accounts Preparation

Organise the records and prepare financial accounts under the applicable framework and agreed scope.

Independent Examination or Audit

A separate form of external scrutiny, with its own requirements for independence, eligibility, scope and reporting.

Preparing the Accounts Does Not Provide the Separate Independent Examination or Audit.

GROWTH CHANGES THE FINANCE FUNCTION

The Systems That Worked at £100,000 May Not Be the Systems You Need at £1 Million

These figures illustrate different scales of operation only. They are not statutory thresholds, a client testimonial or a claimed First4Accounting result.

As an organisation grows, stronger systems and more frequent reporting may be needed. Budgets, cash-flow forecasting, fund accounting, payroll, controls and trustee reporting should develop alongside the activities and people involved.

Clear delegation and documented processes can help make responsibilities workable as the team changes. The aim is proportionate financial management, rather than adding complexity for its own sake.

Growth Should Strengthen Financial Management — Not Overwhelm It.

PRACTICAL FINANCIAL SUPPORT

Not Every Charity Needs a Full-Time Finance Department

Support can be separately scoped around bookkeeping and accounting systems, year-end accounts preparation, management accounts, budgeting, cash-flow forecasting, trustee reporting and fund analysis.

Payroll, VAT or tax matters within competence and a financial-systems or controls review may also be appropriate. The work, responsibilities and frequency of involvement should suit the organisation; not every service is automatically included in one fee.

The same practical approach behind our Business Advisory & Finance Director Support can help trustees connect reporting, forecasts and decisions. The focus remains the charity’s purpose, funding, accountability, people, controls, reserves and cash.

Good Financial Management Gives Trustees Better Information, Better Control and Greater Confidence in the Decisions They Make.

PROPORTIONATE SUPPORT

The Cost Should Reflect the Work the Organisation Actually Needs

Fees depend on legal structure, record quality, transaction volume, the number and type of funds and the bookkeeping required. Payroll, VAT, reporting requirements, management information, complexity and additional advisory work can also affect the scope.

Routine accounting and financial-management support should be distinguished from any independent-examination or audit requirement. We agree the work and responsibilities before confirming a fee. Any work outside that scope should be discussed separately.

Good Records and Clear Responsibilities Usually Reduce the Time Spent Reconstructing What Happened.

CHARITIES & NOT-FOR-PROFIT FAQS

Questions We Are Often Asked

Practical answers for trustees, volunteers and small finance teams. Support is agreed around the organisation and the reporting framework that applies.

Do you act for small charities and not-for-profit organisations?

Yes. We provide practical accounting and financial-management support under an agreed scope, taking account of the organisation’s structure, activities and records. Not every not-for-profit organisation is legally a charity, so that distinction is considered at the outset.

What accounting records should a charity keep?

The records should explain income, expenditure and the financial position, supported by bank reconciliations, invoices, receipts and relevant agreements. Grants, donations, fund records and payroll where applicable also need attention. The detailed requirements depend on the organisation and applicable framework.

What is the difference between restricted and unrestricted funds?

Restricted funds are subject to restrictions on their use, while unrestricted funds are available for the charity’s general purposes within its governing framework. Designated funds are unrestricted amounts trustees have set aside. Individual funding terms and any legal questions need appropriate review before classification or spending decisions are made.

Can you help with charity budgets and cash-flow forecasts?

Yes. We can help bring expected income, expenditure, grant timing, project costs and commitments into a budget and cash-flow model. Fund restrictions and the timing of receipts matter. Forecasts depend on assumptions and do not guarantee that cash-flow problems will be avoided.

Can you prepare management information for trustees?

Yes. We can agree proportionate reports covering income and expenditure, budget comparisons, cash, funds, projects and significant commitments. Frequency and detail depend on the organisation, records and decisions trustees need to consider.

Can you help us develop a reserves policy?

We can help prepare financial analysis and scenarios so trustees can consider risks, income uncertainty, commitments and future plans. Trustees remain responsible for considering and approving their policy. We do not prescribe a universal reserves percentage or number of months’ expenditure.

Can you help improve our charity's financial controls?

Yes. We can review practical arrangements such as authorisation, bank and system access, reconciliations, payroll checks and supporting records. Recommendations should reflect the people and resources available. No control system can guarantee prevention of fraud or loss.

What is the Charities SORP?

The Charities Statement of Recommended Practice provides recommendations for charity accounting and reporting under the relevant framework. Its applicability and the correct version depend on the charity and reporting period. We establish which framework and version apply before preparing accounts or advising on the reporting needed.

Can you help prepare annual charity accounts?

Yes, where the work is within our competence and an appropriate scope has been agreed. We first establish the legal structure, applicable reporting framework and information required. Accounts preparation is separate from any independent examination or audit.

Can you help with the trustees' annual report?

We can support the financial information and reporting process under an agreed scope, including the financial review and reserves information where appropriate. Trustees remain responsible for their report, its account of activities and achievements and its approval.

Can you help with the Charity Commission annual return?

We can help gather information and support preparation under an agreed scope. The applicable submission requirements must be checked for the charity and reporting period, including any accounts, trustees’ annual report or external-scrutiny report required.

Does a charity need an independent examination or audit?

That depends on its legal structure, size, circumstances and applicable requirements. The appropriate form of scrutiny and professional eligibility must be established separately from accounts preparation. Accounts-preparation support should not be taken as an offer of statutory charity audit. No commitment to act as independent examiner is made without separate engagement-specific confirmation.

Can you help with charity payroll and workplace pensions?

Yes. Payroll and workplace-pension support can be separately scoped around staffing arrangements, the information required and responsibilities on each side. This may include payroll records, PAYE and starter or leaver information, with statutory matters considered as applicable.

Do charities have to deal with VAT and tax?

Charitable status does not make every transaction automatically tax-free. VAT, trading, Corporation Tax considerations, Gift Aid, payroll taxes and property activity may need attention. The treatment depends on the facts and current rules, and specialist VAT, tax or legal advice may be required.

Can you provide ongoing financial-management support as the charity grows?

Yes. We can agree support with management accounts, budgets, cash forecasts, fund analysis, trustee reporting and practical systems or control reviews. The level of involvement should develop with the organisation’s needs and remain proportionate to its resources.