FINANCIAL TRAINING TOPICS
by Phil Bartle, PhD
What financial training is needed for participants in micro enterprise income generation?
In both kinds of strengthening (capacity development),
some skills in elementary accounting (financial recording) and reporting (financial statements) are needed. The larger and more elaborate the enterprise or project, the more of the following skills will be needed. You as a mobilizer should use this as a check list on needed training. The following indicate a range topics that could be in the training, from which you choose which are appropriate.
The Principle Behind Double Entry:
Perhaps the most important conceptual point to make in the training is that every transaction represents two elements: one party gives an amount of money, and another party receives that amount of money. That duality is represented in the principle of double entry accounting.
Every line of the ledger should indicate an amount of money coming in and going out. Once that principle is established (and it could be done by role playing, where two people are needed in order to pass money from one to the other), then double entry book keeping can be explained.
The Basic Documents:
The purpose is for the CBO or micro-enterprise to both record and to report on its financial transactions. To do so, the participants should be introduced to the basic documents. These should include first and foremost the ledger book. More about that in detail later.
It should include other financial instruments and documents, such as a receipt, a financial statement, and a budget outcome, the design and purpose of each. It may be advisable for larger projects to keep a set of ledger cards, but that should be optional according to how complex the project may be.
Elements of The Ledger Book:
Lines and columns. Debit. Credit. How to enter a transaction into the ledger book. How to open and how to close. Totals. Practical examples. Variations.
How to record each type of payment according to the project budget lines.
The Cash Book:
What is a cash book.
Recording a Transaction:
What constitutes a transaction. How it is recorded. How it relates to the total amount.
Balance on Record and in Reality:
How cash on hand (and in the bank) as recorded in the ledger book must accurately reflect the amounts of cash (and bank balance). Reconciliation.
The non-official record; how the balance reflects and currently relates to the budget. The balance of each budget line.
The Importance of Receipts:
Invoices and receipts. Why each transaction needs a record other than on the ledger book. What is a receipt?
The how and why of keeping a petty cash account. Advantages and disadvantages.
Recording on Day of Transaction:
The importance of keeping the ledger book up to date.
Keeping the Books Balanced:
How to calculate sums in the ledger.
The Financial Statement:
The official account of the project funds. Income and expenditure. How the statement must reflect the ledger book. How to set up a statement reflecting double entry accounting.
How to enter totals according to budget line. Distinguishing between different sources of income (from UN, from Government, from cash contributions, from valued donated labour and gifts).
Non Monetary Contributions:
Calculating the value of donated goods and labour. Making records to serve as receipts.
Entering the value of donated labour or gifts. (This topic is more appropriate for CBOs constructing communal facilities than for individuals creating micro enterprises).
Distinguishing Between Sources:
Ensuring that each source of income is recorded separately. Showing different source amounts on the financial statement.
Matching Accounts to Inventory:
The importance of showing where items purchased are deployed. How to do it.
Public Scrutiny of Accounts:
The reason for transparency. The right of community members to examine the ledger at any time. The community ownership of the project and therefore of the accounts.
The distribution of financial statements. Verbal reporting to community meetings.
Audit of Accounts:
The legal requirement of audit. Informal audits. The list of topics above can be used as a checklist.
Conducting the Training:
The training should be as useful as possible for empowering communities and ensuring transparency and accuracy. The simplest procedures must be taught, but sufficiently inclusive to ensure that the community project accounts are kept to the required standard.
It is rare to find a skilled and experienced community worker who also has all the above skills. It is equally rare to find an accountant, even one with experience in training, who has experience in working with communities, community groups, or with participatory and facilitative training methods.
Since financial recording and reporting are vital to the success of community projects (because of the importance of financial transparency, and as necessary information for making community decisions), it is important to ensure that the skills are taught, understood, and practised.
Training of trainers is therefore necessary: (1) training your mobilizers and coordinators in the above skills, and/or (2) training accounting specialists in participatory methods of working with communities. That goes beyond the scope of this module. It is a topic of another module; meanwhile it is important to say that this must be included as an essential element in any programme of strengthening low income communities.
Financial Training Workshop:
© Copyright 1967, 1987, 2007 Phil Bartle