Strong financial management is the key to your club's sustainability, ensuring that members can enjoy what you provide for years to come.
In this video, we’re going to cover the basics of financial management.
Financial management is not just the job of the treasurer - the entire management committee is accountable for the financial performance of your club. The treasurer may have day-to-day responsibility for managing the club’s money, but all management committee members share equal accountability for every financial decision.
Therefore this video provides practical advice for ALL committee members.
Consider these questions before we begin:
- What does 'not-for-profit' really mean?
- Which financial 'red flags' should you be vigilant about?
- Are you aware of your club's GST obligations?
Not-for-profit doesn't mean you can’t make money. Instead, it means surplus funds are reinvested into the club, not distributed among members. It's about ensuring every dollar advances your mission, as outlined in your constitution. This could mean saving up for big goals or co-contributing towards a grant-funded project.
So when we say 'not-for-profit,' it means the club uses the money it makes for what's best for the club.
That's why the committee has to approve expenditure. It's not up to just one person, even the president or treasurer, to decide on spending. The committee must agree first, to make sure it's a smart move for the club.
If the committee legitimately needs to spend money in a hurry, say if a fridge breaks down and needs to be repaired before the food spoils, they can make the emergency payment, and then gain retrospective approval of the payment – this is known as ratifying payments.
This process of approving expenses also helps to protect your club against fraud.
There are a number of other safeguards you can use to protect your club’s money against accidental loss, theft or fraud.
These include:
- Requiring two people to authorise payments
- Keeping up-to-date financial records
- Supervising anyone handling cash
- Minimising cash handling by using electronic payments where you can
- Contacting recipients of large amounts before transferring funds
- And supporting members to speak up early if anything doesn’t quite feel right
You can also keep an eye out for financial ‘red flags’, such as:
- An unexpected drop in revenue or dramatic increase in costs
- Continually using the same supplier year-on-year without inviting other suppliers to quote
- Committee members using their own bank accounts rather than using the club’s payment methods
- Money showing up without knowing where it came from
- Or vague answers to questions about the club’s financial situation
Asking regular, discerning questions about the club’s finances is not just a right of committee members - it’s their duty.
By challenging assumptions and seeking clarity, you ensure your club's funds are protected and wisely managed. Remember, the only foolish question is the one you don’t ask!
A good understanding of financial terminology will help you ask good questions and ensure you’re all on the same page when you talk about money.
Here are some common terms:
- Goods and Services Tax or GST is a 10% tax that applies to most goods or services sold in Australia. As a not-for-proft you need to register for GST if the club’s turnover is $150,000 or over (which is double the threshold for a for-profit business).
- Assets are all of the things that your club owns that will be used to generate income. This includes money in the bank, your equipment and your facilities.
- Liabilities are all of the money that the club owes - your debts
.
Assets and liabilities are divided into current and non-current.
Current assets include cash, or assets that you expect to convert to cash within a year, such as selling stock or merchandise. Non-current assets include equipment that you expect to still own in more than a year.
Likewise, current liabilities are debts due within a year and non-current liabilities include longer-term loans.
Financial stewardship is a team effort. By equipping yourselves with knowledge and actively participating in financial governance, you’re not just protecting your club's assets; you're setting the stage for a thriving, community-driven future.