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Banking and investment

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Banking

Choosing a bank

When you are choosing your bank accounts, you need to think about more than just the fees and the rates of interest. Imagine your dealings with the bank and ask yourself a series of questions to help you work out what your priorities are:

  • How does your money come in? Cash, cheques, electronic payments?
  • How do you like to make payments? 
  • Do you need access to cash?
  • Do you need company credit/debit cards?
  • Do you operate overseas?
  • Where are your signatories based? How many need to authorise a payment? 
  • What does your cash flow look like? Are there going to be times when you need to borrow to tide you over, or have spare cash to invest?
  • How many accounts do you need?

Make sure you talk to the people who handle the money on a day to day basis and know the practicalities – like the need to have paying-in facilities you can park near if you often have big cash collections.

When you’ve worked out your priorities, create a scoresheet listing your most important criteria – think evaluating interview candidates or websites comparing products. Be methodical.

Ask other organisations for recommendations, and thoughts on their experience. One thing that seems to cause more trouble than it should is changing signatories – see if you can find someone with a good experience of that.

Be aware that the big banks all have central charity teams and usually the people in your local branch will be able to give you the forms you need, confirm your identity and offer general advice but can’t talk to you about your account.

Other resources:

Charity Finance Group and British Banking Association: Banking for Charities goes into more detail 
Back of the Sofa regularly update their Best Buy table of charity accounts 

Setting up your bank account

Your bank accounts must be in the name of your organisation as per your governing document. 
Each bank has slightly different requirements for setting up accounts and getting it wrong causes delays, so check out:

  • whether they require a Board Minute for each change
  • precise ID requirements for signatories (Anti Money Laundering legislation)
  • if they have any other questions

When you decide on your signatories – it’s a good idea to have 3-5 from which any two can sign - you need to balance the need for proper oversight and control with the availability of senior people and Trustees.

Banking can be an area that causes a lot of frustration – you still need to allow plenty of time for long-winded paper-based processes with several of the big banks.

Spreading the risk and the Financial Services Compensation Scheme (FSCS)

If you have a lot of money, you are expected to think about spreading the risk between banks, in case your bank fails.

The FSCS offers protection for up to £85,000 of money held with a UK-regulated bank or building society, which means that if a bank goes under, you will potentially be covered up to that amount. 
The things to watch out for are that it applies:

  • per organisation (not per account), and
  • per ‘banking licence’ - some banks like Bank of Scotland and Halifax operate under one licence, so amounts in each of these would only be covered once

Find out more from FSCS online

Investments

Why invest?

Investment used to be all about getting more money to further a charity’s aims, but increasingly organisations are looking at whether they can be more effective by investing directly in things that are related to their aims. 

When you are looking at investing your charity’s assets you are encouraged to categorise investments into:

  • Financial investment –  where you are aiming to get best level of return at an acceptable level of risk
  • Programme-related investment – where the purpose of the investment is to support your work, and any return you get is secondary
  • Mixed motive investment – a bit of both, and it’s called mixed motive because neither the financial return nor the contribution to mission would be sufficient to justify the investment on their own

The term social investment is used to cover both programme-related and mixed motive investment.

Where to go for advice?

You do need to take advice – it is a legal requirement unless you (as Trustees) have good reason not to, for example you have sufficient experience in the charity. This is because investments are a risky business.

Further resources

Investment policy guidance for your financial procedures manual

Page last edited Jul 19, 2018

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