Accounting for the money
All funders will require your organisation to be able to account for money coming into the project (income) and money going out (expenditure). Your project accounting system should reflect your organisations accounting policies and procedures, but should also take into account the rules and regulations of the funding body.
Though this is an area that many organisations feel nervous about, at its simplest level an accounting system means keeping clear records on the flow of money in and out of the project such as what has been spent on the project and when, when funding was received and when it was paid out. Keep copies of all orders made on the project, all invoices received, all expenditure paid out and income received. Make sure you have some means of running off financial reports for your project so that you can check that the actual amounts spent and received match what you think you have spent and received. The key thing is for you to be able to clearly distinguish between the funding coming in and going out in relation to this project and other funding and expenditure coming into the organisation. For this reason, it is highly recommended that once the funding has been confirmed you set up a separate financial code for the project so that it can be clearly and easily separated from all other funding your organisation receives and expenditure it pays out.
You might find it useful (or you might be required by the funder) to produce a cash flow forecast, which says when you expect to spend the money against each cost heading. This can be used to track progress in terms of spend and income against projected spend and income, identifying if you are running under or over profile in relation to individual cost headings or the project as a whole. Any anomalies can then be addressed by making amendments or corrections, suggesting remedial action to the project management team or raising the issue with the funder. It should be noted that some programmes have spend ‘targets’, so telling a funder that you are not spending as much as you thought (underspend) won’t always be music to their ears! Also, though some programmes can be flexible around small amounts of overspend, others are not and you will be expected to fund any project overspend yourself. This is why it is very important to estimate your budget as accurately as possible in the first place – see 'Develping a budget.’
