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Me, doing the accounts, sure, why not?!

Me, doing the accounts, sure, why not?!
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Me, doing the accounts, sure, why not?!

Finance | Andrew Chaggar | 30 Mar 2012

Back to the nitty-gritty of running a charity in the UK, Andy Chaggar is finding a steep learning curve arising from a growth in income.

It seems like I’ve done little other in the past month than stare at spreadsheets. Columns and columns of figures have left me feeling somewhat cross-eyed as I’ve worked away on two fairly major financial tasks: our charity’s annual report for last year and the financial sections of the business plan I talked about last month.

These two tasks, while separate, are heavily intertwined as they both demand various forms of financial analysis. Our annual report needs to contain financial statements for the past year and the business plan calls for various forms of historical financial analysis which support the included forecasting. For me, this means a huge amount of number crunching made all the more challenging by our ageing financial systems.

When we first founded EDV in late 2008 I knew that properly documenting our finances was going to be essential to our success. However as a new organisation, founded by people who had just spent the past few years volunteering rather than earning money, resources were scarce. Consequently we didn’t have the luxury of sitting down with a paid accountant and setting up a system that tracked everything and automatically generated all the various reports needed.

Instead the charity got some spreadsheets, me, and my 6 years of experience as a semiconductor engineer. Although I had little, if any, formal accountancy experience I had been trained - by Germans no less - in how to think logically and make millions of transistors not only fit onto a few square millimeters of silicon but also function as a computer. Surely, I thought, it couldn’t be too hard to keep track of money!

So I sat down and started writing down all the likely income and expenditure scenarios I could think of, thinking especially hard about the sometimes chaotic situations I had found myself in while handling money in two previous disaster zones. When I was reasonably happy I wrote a specification and asked people I knew with related experience to review it. Using their feedback I then built the management accounting system that our charity pretty much still uses to this day.

Too big for our (accountancy) boots

The system I built was all fine when our income was only around £16,000, which it was the last time we prepared an annual report. This year, however, we are reporting on a period with income approaching £140,000, and things have been starting to creak. While our independent examiner (Vin) and I recently agreed on draft financial statements for the report, the process of getting there was sometimes painful.

Because I had essentially created the system myself, some major sections needed changes to get them into a format Vin could use without having to spend lots of (billable) hours understanding. I also had to spend a lot of time relabelling incorrectly categorised transactions to be able to generate correct breakdowns.

Worse still, our accounting period covers our work in Haiti - a country that freely uses the American dollar, its own imaginary dollar (read this Wikipedia entry if you don’t believe me) in addition to its actual local currency. Depending on the best deal we made transactions in all of these. This means that exchange rate fluctuations have turned into my arch-nemesis.

Overall then the process of preparing the accounts for independent examination took me far longer than I can afford to spare and the amount of data that will need to be processed will only grow as our charity does.

Furthermore the annual report essentially contains only one-years worth of data and only relative to one fixed point time (our accounting reference date). The financial statements for the business plan need to reflect 3 years of history and up to the same amount of forecasting. They also need to be easy to update, ideally on a quarterly basis, to enable us to monitor and act on results so that our business plan can be a management tool as well as a communications one.

The increasing strains on our now tired accounting system are part of the reason why I’m tackling all my current financial work as a larger whole rather than as isolated tasks. Once our annual accounts are finalised and submitted the plan is to incorporate all the updates needed into a newer, streamlined system that I can then use to more easily generate the business plan numbers as well as further annual statements in future years.

This is the plan, at least as long as I can avoid the evil of exchange rate fluctuations anyway.

In a blog two months ago I stated that local CVS organisations were unlikely to be able to offer much practical support to new groups that operated internationally. This turns out to be wrong and since writing that post I have accessed the Community Accounting Service at York CVS who I wish to thank for an effective and well-priced independent examination.

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Andrew Chaggar

Andy Chaggar is executive director of International Disaster Volunteers (IDV) which he co-founded in 2008. In 2004, he was seriously injured and bereaved in the South East Asian tsunami, after which he became a disaster response volunteer, and founded IDV.

Follow Andy on Twitter @IDVExec

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