Social Business Accounting Zone

As a social business, it’s your responsibility to define the social objectives of your enterprise and outline how you will measure and report success.

You will need a viable, logically consistent, and rigorous social accounting system to report your business goals.


Accounting for social enterprises

Social accounting, or communicating the way your organisation’s actions impact the community, is still in its infancy compared to financial accounting. Most social businesses can choose the social accounting approach that best suits them and the social impact they seek to achieve. 

Look at how other organisations engaged in similar activities present their social accounts to get a better idea of what might work for your social business.  

How to set up social accounting for your enterprise

Start shaping your own social business accounting by considering the following: 

  • What is the impact you wish to achieve? How is your social business helping the community? This corresponds to your aims and vision, and may be long-term. The impact can be achieved through collaboration and/or empowerment, as well as directly by your organisation. 
  • What are the outcomes you are seeking to create? Outcomes describe your activity within a defined time span. They are necessary steps which are easier to measure and contribute to overall impact of your social enterprise.  
  • What are the outputs you will deliver? How do they contribute to your outcome? 

For example: If your social impact is a more resilient local economy, a possible outcome will be the launch of a new business that provides a local service and boosts employment. The outputs might be business training delivered to the people who set it up. 

Social enterprise accounting requirements 

To answer these questions, take the same approach as you would for your commercial objectives. Below, we break down the steps involved in setting up social accounting for your business: 

The social business accounting process 

A step-by-step guide to defining the aims of your social business, setting up targets and defining the best way to measure your goals, as well as the best approaches for reporting results to stakeholders and auditing your data. 

Ensure your social aims are clear  - this is your social manifesto.

It is what you use to rally the stakeholders internal and external to the cause. It enables you to resist mission drift but it also dictates the rest of your planning – enabling the setting of business objectives which can be set down and regularly reviewed.

Set delivery targets and define these by nature, volume, quality and cost.

Once your objectives are clear, you can calculate a target number of units to deliver and the cost and time involved. This becomes the baseline for measuring your achievements.

Measurement

Figure out a way of measuring  if you have met the targets and how you will record these successes for audit later. Top tip here is to try to use or adapt other existing data streams such as work records, client feedback, and so on, to provide you with usable data. Work records can establish that a training output was delivered to someone who was taking up the role of social accountant within a social business. Client feedback at that  point could indicate the quality ('client felt empowered to'). 

A follow up survey a year later might establish whether there was an outcome (a social business actually keeping and reporting social accounts) and a discussion with them 3 years down the road might establish whether this had any  impact (the organisation is better able to target and deliver community services and getting more funding to do more of it).  

Social accounting costs resource and it is important that the cost does not damage the ability of the organisation to deliver social benefit. 

Data needs to be collected simply and economically. Organisations that are able to be very clear about what they do and why they do it tend to find it easier to count the number of times they have done it and ask simple questions about whether it worked.

Set a process for audit  - who, when and how?

An audit verifies that the book-keeping system is fit for purpose and the data has been gathered and recorded properly and the numbers added up correctly for the purpose of reporting. There may be external stakeholders who could provide such a service as well as consultants.

Set a process for reporting. 

There are at least 2 considerations, firstly, how can the results be tabulated and presented in a way that is most easily assimilated and used as a management tool.

Secondly, what are the concerns of other stakeholders? Funding bodies and social investors might need to see clearly and easily what outputs and outcomes were achieved with their financial support. 

Disseminating the results to stakeholders  

When an enterprise reports against social targets, it is seeking to answer questions from internal and external stakeholders similar to these answered by a financial audit. Did the enterprise achieve any of the social objectives they signed up to support? Did this enterprise they gave a grant to do anything for their community?

Once you have answered these questions in your social audit, you can use the resulting document to promote your social business across various channels. 

The social audit can be used as a marketing tool to: 

  • Enhance staff morale, pride and commitment 
  • Raise the profile of the enterprise 
  • Establish an organisation as worthy of support 

It is therefore important to have a dissemination strategy: 

  • Put it up on the web site
  • Put it in the annual report 
  • Put it in a newsletter 
  • Tell the media 
  • Circulate it to stakeholders 

Some more useful resources on industry standards and defining what your own outputs and outcomes look like include: