Should Charities report their cash flows?

Do you know whether Charities should report their cash flows? In this post we cover which charities are required to include a cash flow statement and the benefits of reporting cash flows.

Charities, like many other organisations, need to ensure transparency and accountability in their financial reporting. Per the Charities Statement Of Recommended Practice (SORP), a charity is required to include a cash flow statement in its financial statements if it is classed as a ‘large charity’ which is defined in the SORP as charities with gross income exceeding £500,000. This requirement ensures that larger charities provide a cash flow statement which reconciles the reported surplus or deficit for the year to the movement in the cash balance.

Benefits of reporting cash flows

Smaller charities with income below £500,000 are not required to prepare a cash flow statement. There are however several reasons why they may choose to do so:

• Enhanced Financial Transparency

A cash flow statement provides a clear picture of how cash is being generated and used within the organisation. This transparency can build trust with donors, grantors, and other stakeholders by showing exactly how funds are managed.

• Better Financial Management

By regularly reviewing cash flow statements, small charities can gain insights into their financial health. This helps in identifying potential cash shortages and planning accordingly to ensure that they can meet their obligations and continue their activities smoothly.

• Accountability and Compliance

Including a cash flow statement can demonstrate a charity’s commitment to high standards of financial accountability and compliance. This can be particularly appealing to potential donors and regulatory bodies.

While not all charities are required to include a cash flow statement, doing so can offer benefits. It enhances transparency, aids in financial management, and improves accountability. For small charities, these aspects can be crucial in building trust, ensuring sustainability, and achieving their aims and objectives effectively.

Get In Touch

For support with your charity reporting and compliance, contact your local Whitings LLP office or one of our charity specialists today.

Disclaimer - All information in this post was correct at time of writing.