What is financial management?
      Financial management can be defined as managing the finances of an organisation 
      in order to achieve financial and strategic objectives. Done effectively, this should 
      include a view of the past and a plan for the future... 
      •  Financial statements and reports are backward looking, summarising income 
         and expenditure over a certain period of time. 
      •  Financial planning and budgeting is forward looking, forecasting what is going 
         to happen and what resources will be required in the future. 
          The purpose of financial      ...financial resources of an organisation in 
          management is to...           order to ensure that activities / 
                                        programmes...
                 Establish...                      ...are delivered efficiently.
                  Monitor...                          ...are within budget.
                  Control...                  ...deliver expected financial benefits.
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      Why is financial management important?
      Financial management helps organisations to...
               Make optimum use of their money to achieve maximum 
                                         returns.
              Understand if they have the resources to meet their objectives.
                  Identify short term financial issues and address them as early 
                                             as possible.
                       Express their intentions, and explain what resources are 
                                         required to achieve them.
                         Inform all levels of the organisation about what needs to be 
                               achieved, and the resources available for doing so.
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     Financial statements
     PwC
      Income and expenditure statement
      An income and expenditure account should only contain information regarding 
      cash flow:   money in and money out.
                           In                                  Out
                Cash inflows...                         Cash outflows...
                              payments into                                
                  an organisation from                  payments made by 
                   members or other                       an organisation
                        sources 
      •  It provides a summary of income and expenditure over a specified time (usually 
         one year). 
      •  It includes only revenue items.
      •  The balance at the end shows the net operating result in the form of surplus 
         (i.e. excess of income over expenditure) or deficit (i.e. excess of expenditure 
         over income), which is transferred to the capital fund shown in the balance 
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       Example: income and expenditure statement
                                       2011 (£)        2010 (£)            It should refer to a specified period 
         Income                                                            (usually 12 months).
         Functions Income               4,500           2,000              Different ‘types’ of income 
         Donors                         10,000          8,500              should be listed in the left 
                                                                           hand column. There are no 
         Sponsorship                    5,000           3,000              rules around what these 
                                                                           categories can be - you may 
                                                                           find it easier to have lots of 
                                                                           different categories or you 
         Total Income                   19,500          13,500             might wish to to group similar 
                                                                           items under one heading.
                                                                           Expenses are then listed – 
         Expenditure                                                       categorised appropriately.
         Wages                          9,500           6,000
         Rent                           4,000           3,750              Income minus expenses gives 
                                                                           a net surplus (if income has 
         Utilities                       900             800               been greater than expenses) 
         Travel                         1,000            900               or deficit (if expenses were 
                                                                           greater than income).
                                                                           The net figure is stated before 
         Net Surplus (Before Tax)       4,100           2,010              tax and after tax. 
                                                                           NB: tax exemptions may differ in accordance 
                                                                           with location of operation - contact local 
                                                                           charity commission and / or HMRC for further 
                                                                           details. 
         Net Surplus (After Tax)        4,100           2,010
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