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Seven tips to maintain a charity bank account

Here are seven tips to help you maintain your charity bank account.

Once you have chosen the right bank for your charity and set up your bank account, you need to make sure you are keeping it, alongside your charity’s financial records, in good order. This will help your charity to avoid reputational risk, legal issues and financial penalties, and prevent fraud. Here are seven tips to help you maintain your charity bank account.

1. Set clear processes and internal controls

Start by establishing clear internal financial controls. This includes defining who can access the bank account and make payments. You should limit access to the charity bank account to authorised trustees and employees. The number of people with access to your bank account will depend on the size of your charity. For example, a large charity may have several employees working in finance who will need access, whereas a small charity may have only one person responsible for managing finances.

Regardless of the number of employees and trustees who have access to your bank account, two signatories should be required for withdrawals and payments. This helps to reduce the risk of mistakes or fraudulent transactions.

2. Manage your income and expenditure

You should set an organisational budget for your charity for the fiscal year, which includes both income and expenditure. Expenditure should include any operational costs, such as employee salaries and office costs, and income should include the amount you expect to raise from donations, grants, and fundraising.

It is important to separate restricted and unrestricted funds to ensure the funds are allocated correctly. Restricted funds are funds that are allocated to a specific project or piece of research. While unrestricted funds are donations that can be used for any purpose – so long as it meets your charitable aims and objectives, as outlined in your governing document.

3. Use software to keep track of your finances

Invest in software or accounting tools that connect your database with your charity bank account. This can help save time through the automation of invoices and sending payment reminders, as well as providing accurate reporting and transparency. It can also help you keep track of your budget.

4. Implement security measures

There are many things that you can do to help minimise the risk of fraudulent activity. Make sure that you keep physical bank cards and chequebooks securely locked away. Use up-to-date antivirus and spyware software on your computer and keep any login details, PINs and passwords secure.

Be wary of phishing emails or phone calls that claim to be from your bank. Do not disclose any sensitive information, such as your password or your PIN. If in doubt, contact your bank directly to check if the communication is legitimate.

5. Keep detailed financial records

Keeping detailed records of your accounts is essential for compliance and auditing purposes. You should regularly reconcile your bank statements to identify any discrepancies in payments or transactions.

For any transactions that are not online – such as purchasing something in a store – make sure you keep and store the receipts. If employees or trustees need to claim back expenses, for example, train tickets or petrol expenses, they must produce invoices or receipts. This helps make sure that the transaction can be accounted for correctly.

6. Make sure your charity is compliant with relevant laws

Your financial reporting must comply with the relevant legal requirements in the UK. This includes filing your accounts annually with the Charity Commission and maintaining accurate records for Gift Aid and VAT purposes. Not only is filing your accounts with the Charity Commission a legal requirement, but it also supports transparency in the sector too.

If you fail to submit your Annual Return on time, your entry on the Charity Commissions’ Register of Charities will be marked as overdue. When you do file your accounts, it will show that it was filed late. If your charity continues to file late (or not at all),it will result in the Charity Commission opening an inquiry into your charity, which will be published on its website.

It is important to remember that funders will check your Charity Commission record when you apply for funding and may reject your application if your accounts are not up-to-date.

7. Keep an eye on fees and interest rates

When people donate to a charity, they expect that money to be spent in the most efficient way possible towards achieving the charity’s mission. While you cannot control banks charging fees on transaction costs, international transfers, currency conversions and overdraft fees, you can ensure that you monitor these costs to make sure you are getting the best deal.

You can also look for interest-earning opportunities on your current deposits and monitor interest rates.

At CAF Bank, we are committed to supporting charities and social enterprises, understanding the unique financial needs you face. Learn more about the full range of products offered by CAF Bank.

CAF Bank Limited is authorised by the Prudential Regulation Authority and regulated by the Financial Conduct Authority and the Prudential Regulation Authority (Financial Services Register number: 204451).

CAF Bank Limited Registered office is 25 Kings Hill Avenue, Kings Hill, West Malling, Kent ME19 4JQ. Registered in England and Wales under number 1837656.