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
− You can include any overdue grant payments to your
organisation as assets, either under the heading of ‘debtors’,
or with separate heading if grant payments are frequently late.
• Stock and the importance of stock taking checks:
− Businesses involving production and sales, such as craft
workshops, cafes and shops, need information about their
levels of trade, stock or raw materials for a variety of reasons.
The requirement to include the value on the balance sheet
can be a reminder to carry out unpopular stock taking tasks at
least monthly.
− Business stock may be an important element of the assets,
although the way its value is estimated varies depending on
the nature of the business. It is obviously important to adopt a
consistent approach.
− The act of stock taking provides feedback on what sells,
highlights both customer demand and levels of waste which
should be reflected in purchasing and the costings of what
you sell.
− Stock taking can reveal levels of theft and security needs.
No one who sells crisps and sweets can be unaware of their
tendency to disappear, but few of them appreciate just how
much profit this is draining away in theft. It’s one of several
factors associated with management and control which
accounts for the poor survival rate for community cafes.
Tracking your liabilities: Here’s what you should be aware of in
the ‘liabilities’ section of the balance sheet.
• Creditors:
− You need regular updates on the level of your indebtedness
to suppliers to be sure you have resources to pay bills for raw
materials, stationery, utilities etc.
− Month by month increases in your creditor totals might
mean that you are spending too much money running the
enterprise, and it might also mean that staff are delaying bill
payments to conserve cash in the bank. Either way, it could be
a warning sign.
− Conversely, if the creditor total is very low, it might be useful
to ask whether your business is taking best advantage of credit
facilities with suppliers. There is no point in being a prompt
payer yourselves if this adversely affects your current account
balance or slows your repayments on loans and overdrafts.
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