All organisations should produce a profit and loss account (sometimes called an income and expense account) showing the funds received and spent in a set period.
Ideally organisations should produce a balance sheet, showing assets such as cash in the bank, and liabilities such as loans. Samples are provided below:
Any report prepared is only as good as the data entered. For example a club has signed a contract with a tradesman to build a portable storage shed. Although no payment has been made, financial statements prepared SHOULD show the amount payable as a liability. If the amount payable is not included in the financial statements, the cash position looks considerably more favourable and the money could be spent, leaving the club with a shortfall.
Time constraints within smaller organisations, or perhaps the difficulty in finding experienced bookkeeping assistance, often results in minor errors in the financial statements. When preparing or reviewing financial statements, think about the following:
|Are there any expenses not yet paid but due soon that should be included in the financial statements?||Amend the financial statements to include the amount owing.|
|Has any unbanked cash on hand been included in the financial statements?||Amend the financial statements to include the amount not banked.|
|Are there items in the balance sheet of the financial statements that were there last year, are still there this year and you think the amounts are wrong?||There may be some accounting processes that need to be performed, such as clearing last year’s creditors, or depreciating assets. Go through each balance sheet item and make adjustments, or seek assistance from someone with relevant experience.|
Ideally, a club should produce monthly financial reports. If that’s impractical, quarterly or biannually should be acceptable. External users such as banks, government and suppliers will generally only require financial statements to be provided annually.
However, preparing reports less regularly means a club loses the benefits of up-to-date decision-making information. Infrequent reporting can also result in cash shortfalls, loss of source records and even fraud.