To anticipate and ensure that it always has sufficient funds to meet its expenses, a small association needs to manage its cash flow as closely as possible. This also enables them to have all the figures at hand when making investment decisions, for example.
Keeping accounts for a small association can be done very quickly, as there are now many tools available to help you do it efficiently. Here are our tips for sound, transparent management.
What is the cash flow of a small association?
Cash flow is an accounting concept that covers all the sums available in the association's cash register and bank account. A healthy cash position means that the association is always able to pay the costs it has included in its projected budget (rent, utilities and miscellaneous expenses). If this is not the case, and the association runs out of funds, it will be obliged to reduce its activity, which may mean putting an end to it in the short term.
How can you best manage the cash flow of a small association?
Essential documents
Managing the cash flow of a small association should be done with the help of :
- the annual budget forecast, a financial planning tool designed to help you identify available resources and needs;
- the cash flow forecast, a management tool for forecasting future cash flows throughout the year.
These two documents are essential for keeping close track of your cash flow.
How do I use a budget forecast and a cash flow forecast?
A budget forecast must be transparent and honest. This means that it must be as accurate as possible, taking into account reasonably foreseeable revenues and unavoidable expenses, to which it is common practice to add an amount of around 5% of the total in anticipation of exceptional costs.
A cash flow forecast should include the expected amount of income and expenditure for each month. You should then add to this plan by regularly reporting the exact amounts of your cash flows. This will enable you to check that your forecasts, in terms of both receipts and disbursements, are being met. If you notice any significant deviation from reality, you'll need to adjust your next budget forecast.
Cash management tools for small associations
Cash management involves tracking cash flow. It involves recording income and expenditure in chronological order, with receivables and payables excluded from the accounts.
This type of accounting is perfectly suited to a small association, either in the :
- a single daybook;
- a bank journal and a cash journal;
- a journal book for receipts and another for expenses.
These books can be kept in notebooks, using computer spreadsheets or cash management software.
The notebooks
This method may be sufficient if the association's cash flows are not very significant.
In this case, cash accounting is done by hand in a simple notebook. At the bottom of each page are column totals and balances to be carried forward to the next page.
Good to know: small associations often use a cash register for small purchases. In such cases, cash transactions must be accounted for separately. If they are numerous, a cash book should be kept; otherwise, a simple summary can be drawn up at the end of the year.
The computer spreadsheet
This tool is generally sufficient for managing the cash flow of a small association. The same spreadsheet can be used to show income and expenditure, and the method of outgoing or incoming cash (cash or bank).
Calculations are made automatically, and at the end of each month, you'll receive your cash and bank balances, as well as your net income (i.e. revenues minus expenses).
Cash management software
This type of tool is best suited to associations with substantial cash flows (grants, donations, bank loans, etc.) and administrative and accounting constraints.
Good to know : a small association can also benefit from all the advantages of cash management software simply by opening a special association online account. This provides a bank card andaccounting tools for financial management, avoiding transcription errors and saving time.