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
• What they say: The budget comparison may not tell you much if
the dates of payments and receipts are not regular, and it usually
needs to be interpreted carefully. If the monthly turnover figure
suddenly goes down, how can you tell whether a guaranteed
payment is a week or so late, or sales have slumped?
Financial monitoring for complete beginners
If you’re starting from scratch: Unavoidably many people will
become involved in managing social enterprise activity and will
act as directors for trading companies out of sheer necessity with
little knowledge of or feeling for the way the business world
works. Here are a few tips for beginners.
Don’t be embarrassed: Whether you are someone who is turned
off by accounts or you simply don’t know what to be looking for,
you should not be embarrassed to tell fellow directors or work
colleagues. If you pretend you understand financial reports when
you don’t you could become a liability.
Don’t mention the toilet rolls: People instinctively talk about
the things they understand. This is why, when confronted with
a detailed financial report for a complex trading organisations,
some directors discuss the cost of toilet rolls – or anything else
they feel comfortable with. Anything to avoid the less familiar
features of business finance. Debating trivialities when you should
be monitoring the budget report may be understandable. But it
is often extremely unhelpful for your business. You should resist
doing it, and you should drag the discussion back on course as
soon as possible when you see others doing it.
Numbers with plain language: Problems with engaging with
financial reports can be reduced significantly if directors receive
short written reports in plain language to help interpret the
figures. Then everyone knows what the issues are.
Don’t be afraid to be dumb: Directors have a right, perhaps even
an obligation, to ask dumb questions about the accounts if this
helps them to understand the business. People are often afraid to
ask the obvious, but simple enquiries can be challenging, and the
answers may be enlightening for everyone.
Ask difficult questions: This is monitoring after all. So a question
which might help you and your colleagues to get closer to
understanding the performance of the enterprise is legitimate. If
the information is not readily available or directors are not satisfied
with the answer they get, there are other options - a report to
the next meeting, a chat with the manager or treasurer later, or a
private look at the accounts records themselves. It’s what directors
are for.
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