Opinion

Fighting the cashbook cowboys

Finance | 1 May 2007

Donald Yule advises charities to rigorously check the competence of their bookkeepers.

Picture if you will this scenario. The trustees in Charityville are drinking in the saloon when the swing doors crash open and in stumps the Cashbook Kid. The trustees recoil in horror and then a tall strong silent man stands up and, saying ‘an accountant’s gotta do what an accountant’s gotta do’, drags the interloper out into the street. A minute later he is back, rubs his hands and says ‘he ain’t gonna trouble ya no more boys’, which leads to whoops of joy as the trustees rush to buy the accountant a drink.

While life’s not quite like that, there are cowboys around, but many charities simply cannot spot, for instance, that the nice, honest person who comes in three days a week to do the books and is so helpful round the office, is one of them. They may sound very impressive when talking about taxation or investment, but the fact that they are untrained in bookkeeping or can’t use your accounting system is storing up trouble, particularly around reporting.

So how can you be the one who spots that the Cashbook Kid has just ridden into your town? You may be a CEO, a bursar, a director of operations, or a trustee, all roles usually filled by someone who is not a technical accounting specialist. You might be getting regular lists of the receipts and payments which tie in nicely with the balance on your bank statements. You may also be quite pleased that bills are paid quickly. You may not have picked up any signals from your auditors even though their bill was bigger than ever. But never let that fool you.

Ask some simple questions. How much do we owe? Are we paying our bills too quickly, thus losing income from bank interest? How much money is left in such and such a fund? How much do we have to pay in income tax and NI next month? Ask the nice person to show you the list of account codes, something called a trial balance and an explanation of the figures.

If the nice person squirms and then disappears to play with spreadsheets or starts to takes invoices out of a file and add them up, then suspect that the Cashbook Kid has mosied into your corral. What has probably happened is that records are being kept, but entries are only being made after you bank cash or write a cheque and only part of your system is being utilised.

Here are some bullets for your six shooter. At the end of a month, after your monthly BACS payrun, ask to see that the line with a name like net pay has got a zero balance. Insist that you are shown payroll figures, which show that what has to be paid to HMRC and your pension provider tallies with what your accounting system is telling you. These are very simple checks and good control practice. If the nice person fails your test and they had been taken on with the clear understanding that they could do the job then you may have grounds for dismissal for incompetence.

Far too many charities have been tempted to employ someone who charges a cheap hourly rate, or even someone who appears to be well qualified academically, without rigorously checking their technical competence. It never fails to surprise me how many people do not know that there is an Association of Accounting Technicians. My message is to make doubly sure that the nice person is fully trained in processing, recording, reporting and planning. Both you and they must fully understand that charity accounting is multi-dimensional with cost centres and funding streams to be recorded against and reported on and that accounting systems have to be rejigged to do this. That way there will be no high noon for the good citizens of Charityville.

Donald Yule is a consultant charity finance director 

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