Financial training topics
 by
Phil Bartle, PhD

Curriculum

What financial training is needed for participants in micro
enterprise income generation?

Introduction:

 In both kinds of strengthening (capacity development),
 of the executives of community based organization undertaking
 construction and maintenance of communal facilities, and
 of individuals undertaking the creation and running of viable
 micro enterprises,
 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
 ater. 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.

Budget Lines:

 How to record each type of payment according to the project
 budget lines.

The Cash Book:

 What is a cash book.
 Why, when and how to operate 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.

Budget Outcome:

 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?

Petty Cash:

 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 co-ordinators 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.

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Updated: 2003 April 22