The Charity Commission has launched a new initiative to encourage charities to digitise their accounts.
This month saw the launch of the new ‘taxonomy’ for charities by the Charity Commission, the independent regulator of charities, and the Financial Reporting Council.
At its launch, the Charity Commission hailed the taxonomy as the ‘pre-requisite’ for charities that choose to file their accounts digitally with both Companies House and the Commission.
The new taxonomy for charities reporting under the Financial Reporting Standard applicable in the UK and Republic of Ireland (FRS 102) is essential guidance for charities wishing to file their accounts online with Companies House and the Commission.
It acts as a digital data dictionary that defines the computer-readable tags that identify individual items of data in charity reports and accounts for electronic filing and other analytical purposes.
More than 70 per cent of companies file digital accounts with Companies House, but up to now this has not been an option for charities.
Both the Commission and Companies House are actively evaluating digital filing with the intention of enabling this option for charitable companies and thereby making accounts filing quicker and easier for charities.
In addition anyone using digital accounts will be able to extract the tagged reporting and accounting information that they want and analyse it more efficiently.
Those charities filing tax returns with HMRC will also benefit from having the option of digital filing when submitting supporting accounting information.
Nigel Davies, Head of Accountancy Services at the Commission said: “The taxonomy is a fruit of our investment in this technology and our effective joint working with the FRC. With 35,000 charities having to file their accounts with us and Companies House it made sense to open the door to digital filing as an option for charities.
“In going forward, we are very interested in understanding more about both the demand from users of charity reports and accounts for digital data, and the appetite the sector has for making digital filing a reality.”
Charities will still have the option to file accounts by PDF, but the Commission has noted the popularity of digital filing by companies with Companies House and wishes charities to benefit from this option as well.
The Commission is evaluating the potential benefits of enabling its own digital filing option for charity accounts and anticipates announcing its plans later this year. In the interim, the Commission can currently accept digital (iXBRL) accounts for display, but has no capability to make use of the data.
Digital accounts have become ubiquitous among the majority of businesses in the UK but many charities still rely upon ‘pen and paper’ techniques to manage their affairs. The suite of software now available means that online accounting is an option for some charities although it is important to emphasise that this is not a ‘one size fits all’ solution and smaller organisations will need to carefully weigh up the benefits versus the additional costs.
The advantages for charities that decide to adopt this way of working, include:
- The ability to create and send sales invoices using the software
- Streamlined processes
- No need to send in back-ups when year-end accounts need preparing – both you and your accountant can be logged in at the same time, wherever you are
- The ability to maintain credit control procedures by using the system to send out statements and reminders to any slow payers
- Managing supplier accounts online
- Creation of VAT returns online and the chance to review VAT liability at any time
- Importing transactions from your business bank account, saving data entry time
- Access to a ‘business dashboard’ at the touch of a button, to see your key performance indicators at any time
- The ability to download an app to your smartphone and manage your accounts on the move
- Access and the option to delegate any parts of the accounting functions to us or to your own staff
- No need to worry about hardware failures – the data is securely stored in the cloud and software updates are automatic
If you are interested in finding out more about our online accounting services and how they may benefit your organisation, please contact us.