Working together with your project partner: a good financial administration in 4 steps

ErnstJan Stroes

By ErnstJan Stroes

Programme Coordinator Citizen Initiatives. ErnstJan manages the secretariat of the European Network for the support of private initiatives from Wilde Ganzen.

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Managing a thorough administration and being able to provide administrative proof at any time of the encountered expenditures and their related deliverables is one of the most essential capacities of a real and independent organisation. But these capacities are far from obvious in the sometimes complex realities that we work in. That is why it is good to figure out how to create an effective and reliable administration and continuously verify and update your administrative practices and procedures.

Getting started

The first step to come to an appropriate administration is to identify what is the most regular prove of payment and how payments are done. Prove can consist of; cash receipts, invoices, bills, pictures, signed declarations, etcetera’s. Payments can be done; electronically, by mobile, with cash, through deposits and bank transfers. But always there are at least two parties that participate in a transaction a received bill is countered by a deposit, a cash receipt is countered by an electronic payment, etcetera’s. It should almost always be possible to connect payments to actions. Investigating what is usually the practice in your country is a way to get an approach to administrative practices that is both relevant and legally sound.

The second step is to understand existing financial procedures that you have and what are the practices in that field. How is administrative proof generated at the moment. Are there clear procedures and requirements that deliver legally sound and sufficient proof? Which data are collected and can the administration be based upon?

The third step is to study who has the right to take financial decisions according to the legislation in your country, is it the chairperson, the director, the treasurer or the cashier? Is it just one person or should two or even more people be involved? How are the decisions registered? What are the safety measures applied? Who has access to the bank account, who are able to transfer money. Which people have access to the patty cash, how should contracts be signed and assignments be implemented?

The last and fourth step is to check what are the legal requirements regarding administration. What are the laws regarding, taxes, social insurances, archiving prove and public reporting.

There is always room for improvement

When prove, procedures, competences and legislation are well understood you can look into the need to improve the administrative system, and how to make it more fool proof and relevant. Most important is to keep making sure the system collects and registers all relevant prove. An important aspect where improvements can be made are, procedures as they tend to become larger and longer than necessary. Too complex procedures delay payments to counterparts and can harm the organisations ability to deliver on its promises, but too simple procedures deliver limited reliability of the administrative system and can result in uncontrolled spending.

So it is important to find the right balance between complex and simple or actually fast spending and secure spending. Another important point is to which extend the administration is able to fulfil the legal requirements. Last but least don’t develop systems that just satisfy the administrative needs of your foreign funders. Such systems have very limited relevance in informing the wider community of your stakeholders and beneficiaries and therefore will end when the relation with the funder has ended.

It is advisable to evaluate your system regularly especially if your organisation is growing to realign with new realities and requirements. Regulations and needs change during time. In the start a simple ledger might be sufficient but in time a full-fledged online accountancy programme could be needed in which more than one person can work. Legal requirements may change as well which may result in the need to adapt the system.

What’s in it

A good administrative system enables one to generate those things that are relevant for accounting and managing the organisation. Cash flow, annual reports and budgets can only be prepared if the administrative system works and is fed with reliable data. The same is true for financial accountability regarding projects and programmes. All this is many times easier and trustworthy if the administrative system works as it should.

For more help please refer to the toolkit ‘Financial Management’ on the Change the Game Academy website.