The charity sector continues to face growing financial and regulatory pressures. Alongside rising costs and increasing demand for services, charities are also preparing for major changes to financial reporting requirements.
For trustees and finance teams, balancing compliance with day-to-day operations is becoming increasingly challenging.
Here are five of the biggest accounting challenges charities are likely to face in 2026 and beyond.
1. Preparing for the New Charities SORP
The updated Charities SORP, effective from January 2026, introduces significant changes including new reporting tiers, updated income recognition rules and lease accounting requirements. Many charities will need to review contracts, accounting policies and reporting processes well before implementation.
2. Understanding the New Audit Thresholds
Updated audit thresholds from September 2026 may mean some charities no longer require a statutory audit. While this could reduce compliance costs, trustees will still need to consider funder expectations, governance requirements and whether a voluntary audit remains beneficial.
3. Managing Financial Pressure
Rising costs, unpredictable income streams and increasing demand for services continue to place pressure on charities. Strong budgeting, cash flow forecasting and reserves management are becoming increasingly important to demonstrate financial sustainability.
4. Keeping Up with Digital Transformation
Many charities are still relying on manual or outdated finance systems. Modernising financial processes can improve reporting, strengthen controls and streamline audits, but implementing new systems can be difficult where time and resources are limited.
5. Managing Restricted Funds and Complex Funding
Tracking restricted income, grant conditions and multiple funding streams remains a major challenge for many charities. Clear record keeping and strong fund reporting are essential to ensure compliance and support effective trustee decision making.
How Caldwell Penn Can Help
At Caldwell Penn, we work closely with charities to help them navigate accounting changes, strengthen financial processes and prepare for future reporting requirements. Our team work with you throughout the year, not just after the year end to help you navigate challenges, improve processes and prepare confidently for the future.
