Is your Financial Governance up to Scratch?
As the financial year draws to a close for the majority of Community and Sporting clubs across Victoria it is timely for committee (board) members to consider their role in the preparation, scrutiny and presentation of their club’s annual financial reports.
The committee has an obligation to ensure that your club’s records are complete and accurate through the adoption of appropriate accounting policies, and the design and implementation of appropriate controls and processes.
In our over 20+ years of collective experience, we have witnessed a number of instances where accounting and governance processes could have been improved. Here are our 5 key tips to ensure your financial reports are appropriate in terms of accuracy, disclosure and presentation:
Often a committee will be presented with a set of financial accounts with limited background information as to what makes up the balance of each account on the balance sheet. Ensuring key items such as stock (inventory), employee entitlements, ATO and other statutory obligations, the content of the fixed assets register and the classification of external (e.g., bank) debt are disclosed correctly will help prevent the reports becoming qualified by an external auditor.
It is a prudent measure to make certain that there is ample liquidity in the club to meet its short–term debt. This can be achieved by confirming that the bank accounts have been reconciled up to and including the last business day of the period, as well as periodically reviewing the Trade Debtors, Trade Creditors and short-termemployee, ATO and other statutory commitments of the clu– to identify any potentially overdue debts or amounts owing that could result in a penalty interest rate.
The best way to ensure there are no ‘nasty surprises’ when the conclusion of the Financial Year rolls around is the cyclical and regular preparation of Management Accounts. These management accounts should be prepared monthly and consist of a presentation of the club’s Balance Sheet and a Full Profit & Loss Statement for the period. Each Committee member should feel comfortable with the accuracy of the numbers presented, and apply a level of scrutiny to the financial statements as if they were the year end accounts.
Ensuring that employees, have a clear definition of their roles and responsibilities is possibly the most robust governance control. However, many hospitality operators succumb to common pitfalls, such as overlooking the need to separate the cash handler from the cash counter. For example, is the night manager also the employee counting back the tills after a day’s trade? In this scenario discrepancies may be unreported, hidden or ignored.
A simple tracking method of performance is to institute benchmarks that are relevant to the nature of your club. These benchmarks should be established in consultation with a third party who can provide objectivity and an understanding of how the club fits in the landscape of the club sector.
If robust accounting policies, controls and processes have been adopted, the identification of trends can be easily facilitated and provide the club with the flexibility to respond to market trends and broader economic conditions.
CCV long term Partner, On Tap Hospitality have a proven track record working with Victorian clubs providing outsourced accounting, payroll and advisory resources – a viable alternative to the traditional bookkeeping model also capable of conducting internal control and risk reviews.
For a discussion regarding any aspect of the above, please feel free to contact Freddie Deegan via email at [email protected]