A guide to third sector trading - WCVA

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It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support • Shares and bonds can bring members of a community around a fundraising campaign to support a community trading venture. They attract publicity and volunteers to help get projects going. • A financial commitment by the community can demonstrate support to other supporters and investors. Share and bond issues can also fill crucial funding gaps if commercial investors are unwilling to lend money to meet the full cost of a project. • The amount of individual investments can be set at a figure which is appropriate to the needs of the project. In better off areas it is not unreasonable to price shares and bonds at £50 or more but a reasonable figure might be £5 or £10 in poorer communities. Disadvantages: • Bond and share issues are relatively expensive to set up and manage – the cost is said to be £2,500 or more, so they are not suited to smaller scale projects. • Poorer communities, where the social need may be greater, cannot easily raise the same sums as more affluent areas, where some investors can be prepared to put up £500 or £1000 each. It’s worth considering this carefully before going to the cost and effort of setting up a scheme. Information: • The Wales Co-op Centre are experts in the field in Wales: tel 029 2055 4955; web site www.walescoop.com. • The Development Trusts Association report Community Share and Bond Issues - The sharpest tool in the box by Chris Hill of the Camberwell Project, London provides helpful guidance and examples from England. Development Trusts Association tel 0845 458 8336; web site www.dta.org.uk. • The legalities are complex and may not to be to everyone’s taste. • A bond or share issue is not guaranteed to raise all the investment you need. Success may depend on the attractiveness of the project, the effectiveness of the business plan, or the impact of the campaign. 132
It’s an idea, but is it business? A guide to third sector trading 1: Getting started 2: First steps 3: Business planning 4: Legal and governance 5: Funding and resourcing 6: Financial controls 7: Managing growth 8: Management and governance 9: Social enterprise 10: Sources of support 6: Financial controls and monitoring 6.1 The basics of financial monitoring? If a third sector trading organisation fails, the management committee or board of directors is ultimately responsible, and could in some circumstances be financially liable. Yet many ventures which started as community projects are hard pressed even to produce a monthly balance sheet and a reconciled bank balance figure to show how they are performing. This chapter shows how the board can be more in control of their money. An overview Board responsibilities: The Board is responsible for the business, and to do this they must have ultimate control (but not usually day-to-day control) over it. They carry out this responsibility by: • appointing people to manage the business’ finances – the Treasurer (a board member) the manager, finance officer or finance administrator to keep records and produce reports, and the accountant to verify the annual accounts and provide expert advice • monitoring their work • deciding how financial information is presented to the board and how it is discussed • controlling most or all of the big decisions on issues such as employment and investment • ensuring they understand how the business is performing • taking action if things go wrong. What’s the point of financial monitoring for a business? Financial monitoring is indispensible. It is the job of both the manager and the board: • to check that things are being done properly • to help directors to understand the business so that they are properly equipped to make policy decisions • to track the performance of the business 133
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