Charities and banking – some lessons we can learn

Recently, I attended the ICAEW charity meet up group in the Midlands and received a presentation from Richard Hunt of CAF Bank on the thorny question of charity banking. We have all had issues with banking for charities particularly (but not exclusively) with the big banks who self-evidently do not appear to want to engage in the sector, which is why he was invited to speak to us. He set out the reasons for using his own bank and was honest enough to explain that their offering was not for all charities. However, he also gave us some tips on how we could improve the process for ourselves and some guidance on how we could avoid some of the more common pitfalls, which I want to share with you as follows:

1. Keep a record of who is on the bank mandate and keep the bank informed of changes. We tend to have the same signatories for years and, when a change occurs, we find we have not kept the bank informed and can't find a current trustee on the mandate so our problems multiply.
2. Keep records of authority levels and those entitled to authorise, again for the reasons stated above.
3. Read the paperwork. Whilst it could be simpler, too often the information provided is either lacking or not what was asked for.
4. Provide the requested documentation. Too often documentation required is not attached and this delays the process.
5. Money laundering procedures are not going away anytime soon. Whist we all bemoan the faff around money laundering and identifying people who are authorising payments, the use of charities as a filter for laundering money, both overseas payment and within the UK means we are going to have to live with it but, again, good preparation can minimise the frustration if not completely stop it.
6. Know your governing document. Often delays are caused by stating something in the application which does not tally with the constitution; again, it makes delays. And finally…
7. Avoid cash and cheques if you can. We know banks don't like it and, with continuous closure of branches of banks and post offices, it is getting harder and harder to pay in cash and cheques. Being pragmatic, this problem is not going to go away and is only going to get worse, so charities are going to have to be more creative in dealing with the issue with an increased use of standing orders, Direct Debits, prepaid entry to events and, for things like raffles, fairs and even street collections, the use of smart card machines to take contactless payments.

Banking is one of the biggest frustrations and waste of charity time and, with the big boys seemingly opting out of the sector (unless they want to prove me wrong or as I have previously suggested burnish their CSR or EDI credentials), then it will be the likes of Metro, CAF, Unity, Starling and other challenger banks who will be needed to take up the banking cudgels on behalf of the charity sector. We may also have to sacrifice free banking in some cases but the cost of this measured against driving miles to pay in a few cheques may be worth the sacrifice!

This article was originally published by Strategy and Governance.

NCVO, NAVCA, ACRE, WCVA and CFG have published a report on the banking challenges of charities following a survey which received responses from over 1,200 voluntary organisations. The report is available here.