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Day trip by Pimento, reserves policy by CASH

Financial health checks

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Petty cash

There should be a lockable cash tin and an account book (or separate page in the bank analysis book) in which details of all cash transactions are recorded.

An imprest system should be used (See CASHFACTS: Accounting for CASH). This means the organisation has a float of cash – say £100. When the majority of the money has been spent, say £78.27, the float is topped up again to the original float of £100 by cashing a cheque for £78.27.

CASH recommends this system because errors are easily spotted and people can be asked to find missing receipts – bus tickets etc. – or explain why the tin is short of money. For each payment there should be a voucher signed by the person receiving the money and by the person authorising the expenditure. Check that the vouchers and the cash in the tin add up to the level of the float. If they do not, ask those who have access to the cash tin for explanations. The petty cash book should be balanced with the tin and signed at least once a week.

If an imprest system is not used check that the cash paid into the tin equals the expenditure plus the remaining cash in the tin. Start from when the petty cash was last balanced or from the start of the financial year. As with the imprest system there should be a receipt when ever people consider if this is really necessary or whether there should be more than one float?

PAYE & Schedule D

If the organisation pays staff then they should receive a payslip with tax and national insurance deducted. The main form for calculating deductions is the P11D. A small sample of these forms should be checked. People who are not paying tax or national insurance must either be below the national insurance threshold and have signed an Inland Revenue form P46 indicating that the work is their only job, or have given the organisation a Schedule D number to prove that they are registered with the Inland Revenue as self employed.


The Charity Commission advises charities to have a written reserves policy (See CASHFACTS: Reserves policy). This should cover the funding required to bridge the gap to a new source of funding or allow for an orderly winding up of the charity’s affairs should this become necessary. Typically a charity might plan to have reserves of between 15% and 25% of annual expenditure.

VAT and corporation tax

Is the charity liable to pay these taxes? The Customs and Excise website give more information.

Fundraising strategy

Has the organisation identified adequate sources of income for the next twelve months and does it have a fundraising strategy covering the next three years (see CASHFACTS: Fundraising)? Are there enough current fundraising applications, taking into account that they will not all be successful and typically it will take four months for an application to be approved or longer for the monies to be drawn down?

Financial controls

Is there a written set of rules covering who can sign cheques etc.? (See CASHFACTS: Financial Controls). Do they need to be revised?

Computerised accounts

Is the system functioning well and better than a manual system? Are regular back-ups made of data?


Does the charity have public liability – and if relevant – office contents, employer’s liability and vehicle insurance? Consider what other insurances might be needed and whether the amounts covered are high enough. (See CASHFACTS: Insurance Policies)


Is there a staff pension scheme, or should fund raising budgets be designed to include the introduction of a pension scheme? (See CASHFACTS: Pensions).

Staff loans

Ask if there are any loans outstanding to individuals? Generally this is not good practice, but loans are sometimes made for annual season tickets. There should always be a written agreement allowing the loan to be repaid through deductions from salary.


Is the organisation able to produce estimates of expenditure on:

  • Direct Charitable Activities.
  • Management and Administration.
  • Fundraising.

Can the organisation identify restricted income and charge relevant expenditure to that income? You need to be able to identify expenditure against projects. This can be a simple mechanism – such as photocopies of payslips, invoices etc in the appropriate funder’s file.

Stock control

Does the organisation hold significant stocks of items for resale such as books, or are there large amounts of office stationary etc? Bearing in mind the cost of administration, would it be wise to introduce a stock control system?

Fixed asset register

Is there a list of the assets owned by the charity with details of cost, depreciation policy, serial numbers and where stored? Typically this list would cover items valued at £100 or more. Is it accurate?

Action plan

Now write a plan with a timetable for rectifying any weaknesses.

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Last updated: Mon, Mar 31 2008 - 03:03:41 PM

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