A guide to third sector trading - WCVA

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
• any loans made to a subsidiary – which must be at market rates
and repayable in a reasonable period.
You may want to check the details of these requirements with the
Charity Commission or consult your accountant on how to make
sure your arrangements are appropriate.
Monitoring different trading activities: Many enterprises,
particularly those which emerge from community regeneration
projects, undertake more than one distinct trading activity
at a time. These might be quite closely related (like a crèche
and an after school club, or a graphic design workshop and
book publishing), or quite distinct (like a crèche and graphic
design). Either way, keeping records which allow you to separate
out the income and expenditure of each is essential for your
understanding and control of the business.
• It allows you to collect valuable information about costing,
staffing and marketing your activities.
• It immediately identifies profitable and less profitable activities
and allows you to make separate adjustments appropriate to the
needs of each of them.
• It helps to reduce the possibility of accidentally using a
successful venture to subsidise a less successful one – which can
easily leave you with two failed trading activities.
Analyse early: When you are starting out as a trading organisation
the levels of income for each activity will probably initially be very
small, especially if you have begun tentatively or have tested the
market with pilot projects. The need for analysing the finances of
each one may not be immediately obvious. But later when they
start to grow you will probably regret not doing so earlier because
you will have lost the opportunity to collect potentially valuable
information. So it is often worthwhile to plan from the start to
have a flexible (but not necessarily elaborate) system which
gives you scope for analysing several activities as stand alone
‘departments’ or ‘cost centres’ (see below).
Using cost centres
Accounting for diversity: A private trading company on an
industrial estate would be considered strange, not to say
potentially unsound, if it was providing nursery facilities, making
craft goods, running a café, and offering consultancy services.
But when a community-based organisations does all these things
it is more likely to be regarded with admiration than disbelief.
Compared with conventional business, the activities of many third
sector trading ventures (particularly those with origins in social or
community projects) often tend to be unspecialised and diffuse.
They need accounting systems to match.
146