What's the difference between funds, categories, category connectors, projects and transaction groups?

This article gives an overview of funds, categories, category connectors, projects and transaction groups, and provides helpful information on when and how you can use these.

Funds

Funds are the 'pots' of value that exist on your balance sheet. Your balance sheet may be made up of cash (in-hand), investments, and assets. Irrespective of what type of value you're accounting for, this must be within a 'fund'.

• Most churches and charities have a 'General' unrestricted fund into which most of your income and expenditure will go.
• You may also have a number of restricted funds, where you have collected or been given money for a specific purpose e.g. you are raising money for a roof repair and receiving grants or specific donations for this. Restricted funds are subject to an external restriction from the donor, and can only be redesignated with the consent of the original donor or the Charity Commission.
• Finally, you might also have designated funds, for example for projects and events that you run or where you have money 'set aside' as reserves, and you wish this money to remain separate from your 'General' fund.  Designated funds contain money specifically set aside as the result of an internal governance decision (discretionary) and therefore they are unrestricted.

You can learn more about funds and fund accounting in this blog article: What is fund accounting for charities?

Funds can be managed in the fund settings screen.

Categories

In each fund you will have a number of Income and Expenditure categories.

There are referred to as nominal codes in other accountancy programs.

Categories allow you to track income and expenditure. To help with this, ExpensePlus has Category Groups (parent groupings of multiple categories) that enable you to group together similar categories.

For example, you may have an expenditure category group called 'Building', under which you have categories called 'Maintenance', 'Cleaning', 'Utilities', etc.

You should set up your categories as you wish them to show in your monthly management reports.

There is no requirement for each fund to have the same categories. In fact, many organisations have hundreds of categories in their 'General' fund, but only 2 to 3 categories in a 'Grant' fund (i.e. just the relevant categories associated with the grant).

In addition to the income and expenditure categories, each fund will have a fixed asset category for when a piece of capitalised equipment or freehold property is purchased.

Learn how to set up your categories here.

Category connectors

As well as viewing income and expenditure for each fund, it's also useful to be able to see, analyse, and group together income and expenditure across all funds.

In ExpensePlus you can 'link' categories together using the category connectors functionality.

To do this, you need to first set up your category connector structure (which may well be the same as your general fund categories, although it doesn't have to be).

You will then be able to assign each category in ExpensePlus to a category connector to determine how the transactions in these categories show in the Income & Expenditure Summary (by Category Connector) report.

Learn how to set up category connectors here.

Category types

While category connectors are used for internal reporting, category types are similar but are used for your year-end reports.

You will need to assign category types for each category, even if you do not use the category connectors function.

You can find out more here: What are Category Types?

Projects

When you run a specific project or event, you will likely have one or more income and expenditure categories associated with it.

For example, a weekend away for your youth group will have ticket income and event expenditure.

These categories may well sit within your 'General' Fund.

However, where projects or events are self-funding, we'd recommend creating a separate 'projects and events' fund for these to sit within.

The projects feature in ExpensePlus lets you 'link' income and expenditure categories that relate to a project together, enabling you to view a report for each project that also includes a running balance.

Projects are a bit like having a sub-fund within a fund. By using this functionality, you can keep track of the project income, expenditure, and the resulting surplus or deficit using the Summary (by Project) report.

If you set up a project mid-year, all transactions from that year (dated before and after your setting up the project) will be included in the project, as all transactions in the categories linked ot the project are included.

Learn more about how projects work here.

Transaction groups

Transaction groups are similar to projects, in that they allow you to monitor income, expenditure, and a running balance.

But the data comes from individual transactions grouped together, not whole categories grouped together.

Whichever category you allocate an income receipt or purchase to, you can specify to allocate all or part of the transaction to a transaction group of your choosing. Your system administrator will need to decide whether your organisation will use the transaction group functionality. Within Organisation Settings, they can specify the use of transaction groups as optional, hidden (off), or required. Transaction groups can be monitored using the Transactions (by Transaction Group) report.

Learn more about transaction groups here.