How do you manage your association's cash flow?
Managing your association's cash flow is fundamental to ensuring that your organization runs smoothly and transparently, and that it continues to operate in the long term.
If you're in charge of your association's accounts, 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.
What type of accounting is best for an association?
Cash flow accounting
Cash accounting (or cash receipts accounting), with its streamlined procedures, is aimed at the smallest structures in the associative world.
🔎 In practice :
- You keep chronological track of receipts and disbursements;
- You keep a "receipts-expenditures" table in which you enter your bank statements and supporting documents (till receipts, checkbook stubs, etc.). All transactions are recorded according to the bank account;
- Every month, you calculate the balance between income and expenditure. The result reflects the association's financial situation.
- 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 enterprises. It is recommended for large associations and compulsory for those that must comply with the provisions of the associative chart of accounts.
🔎 In practice :
- You record receivables and payables as soon as they appear;
- You keep track of income and expenses, as well as accounts receivable and accounts payable;
- You draw up annual accounts and are subject to auditing by a statutory auditor ;
- The purpose of your bookkeeping is to report to members, partners and funders on the use of the money you have paid in (membership fees and donations).
Cash flow obligations for associations
While it is compulsory for your association under the 1901 law to keep accounts and manage the resulting cash flow, there is no set format for the presentation of accounts.
Obligations therefore depend on the structure: nature of the activity, size of the association and sources of funding in particular.
How do you manage your association's cash flow?
Cash flow refers to the money available in your association's accounts. To manage it as effectively as possible and benefit from sufficient working capital, you need to keep a close eye on your cash flow, month by month, just as businesses do.
Forecast cash receipts
Cash receipts for your association include
- membership fees
- subsidies
- donations
- income from sales or related services,
- bank loans, etc.
Forecast disbursements
Cash outflows essentially comprise :
- fixed expenses (rent, insurance, water, electricity and Internet subscriptions),
- bank charges,
- salaries, social security charges and employer's contributions,
- taxes, where applicable,
- payment to suppliers,
- payment of service providers (accountants, etc.),
- loan repayments,
- purchase of supplies,
- expenses related to associative events,
- volunteer expenses, etc.
Monitor cash flow with an associative 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 previous years' cash flows, with a margin of prudence;
- to be monitored and updated according to 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 fees collected at the beginning of the year usually cover the coming year's expenses.
If your forecast budget is correctly drawn up at the start of the year, then you're less likely to have to find new sources of financing to make up for cash flow difficulties.
The role of the treasurer in an association
An association is run by volunteers, including a treasurer .
Even if it's not compulsory to appoint one, the treasurer has a very important role to play.
Working closely with the Chairman, he ensures sound financial management and proper use of the funds entrusted to him in the name and on behalf of the association.
Associathèque
He/she may be entrusted with delegated powers, such as signature to make payments and access to the association's bank accounts.
Depending on the size of the organization, the executive's duties may include:
- 🎯 determining the expenses to be incurred for the smooth running of associative 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 the annual closing of accounts,
- 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 appeals for public donations, etc. ;
- 🎯 to present the association's accounts to all members at the Annual General Meeting (AGM), usually once a year;
- 🎯 f ulfill or supervise accounting, social and tax obligations:
- timely filing of returns,
- payment of invoices,
- filing of accounting documents,
- management of cash receipts,
- bank reconciliations,
- relations with banks, suppliers, authorities, 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 in charge of the association's financial control.
Simplify cash management with Excel or a software package
Excel for association cash management
Excel is the first software you think of for simple association bookkeeping. It's not software specifically developed for bookkeeping, but a spreadsheet program.
It can meet basic needs for tracking cash receipts and disbursements.
But for more advanced accounting, the tool lacks intuitiveness and a collaborative dimension.
In the event of an audit, you'll need to convert the .xls file into a .pdf so that it can no longer be modified, as accounting documents must not be altered.
Find the right management software for your association with this quiz:
The benefits of dedicated software for associations
Associations, too, are entitled to tools that make cash management simple! Online accounting software for associations offers the following advantages:
- eliminates manual data entry and reduces the risk of errors ;
- significant time savings thanks to task automation (e.g., accounting entries);
- real-time visibility of your cash position , thanks to constantly updated data and dashboards;
- collaborative features for working more efficiently with other association members;
- free or low-cost versions adapted to smaller structures or those with minimal activity,
▷ Here are some examples of comprehensive management tools that include accounting among other functions:
- AssoConnect provides a quick, simplified overview of your cash position and centralizes your accounting entries. It also enables you to monitor your cash flow in real time, thanks to synchronization with your bank.
- BAWEB (B-association) integrates income statements, balance sheets and budget forecasts; 5 people can work simultaneously on cash management.
Article translated from French