INTRODUCTION
Like any business or service provider, money in and money out are the foundation of financial stability for rural utility co-operatives.
Incoming payments by the members make it possible for the water co-op to pay for its operating costs and capital projects. Small mistakes managing accounts payable or receivable can snowball into larger problems if your Board does not have clear policies or processes.
This guide is designed to help rural water co-ops in Alberta with establishing good habits, protecting the water co-op’s assets and maintaining the trust of members.
COMMONLY ASKED QUESTIONS
What are “accounts payable” and “accounts receivable”?
- Accounts Payable: Money the water co-op owes
(Think about invoices we’ve received from suppliers, contractors, or insurance providers)
- Accounts Receivable: Money that members owe the water co-op
(Think about rates for water usage and a per-member portion of administrative costs)
Together, these keep your co-op’s financial heartbeat and water pumping.
I don’t have much financial training. How can I contribute to the Board?
If you can manage household bills, you already have the instincts for financial stewardship. Start with coming to the Board meeting prepared, asking questions about financial reports, trying to understand trends, while keeping the big picture of long-term sustainability in mind.
In the context of accounts payables and receivables, support the water co-op having good, consistent financial habits. This should include clear policies for billing members and collecting on their accounts, as well as policies for who signs off on which expenses when bills need to be paid.
Do we really need financial policies? We know and trust our members.
Your water co-op will want to have financial policies in place to protect your members and volunteer Directors. Policies keep things fair, transparent and consistent. They can prevent misunderstandings by being upfront about how member accounts are handled, and what happens when members are late on their payments, and other financial scenarios.
Having policies and consistently (and calmly) applying them, gives rural water co-ops a framework to offer solutions to financial matters, while remaining committed to not singling out or shaming any individuals. Remember, policies are not about punishment! They are a basic written agreement about shared financial responsibilities to help keep water flowing to the membership.
Policies also act as your water co-op’s knowledge library, passing on the history of how things are done to the next generation of leaders. Succession planning and change management can be a bit easier when financial policies and best practices remain consistent through times of change.
What should we do if our water co-op is between Treasurers, or doesn’t have strong financial tracking systems or policies yet?
Your water co-op’s first priority is to protect the basics: paying the bills, collecting and depositing payments from members, and recording all the transactions clearly.
The next thing is to have two sets of eyes on everything relating to the finances. Don’t put all the pressure and responsibility on one person. Work together as a Board to do the best you can, and if you need to, hire a local bookkeeper for a few hours a month.
Your water co-op can also lean on the Alberta Federation of Rural Water Co-ops and your neighbouring water co-ops for advice and mentorship.
FINANCIAL POLICIES TO PROTECT THE WATER CO-OP
Joining the Board is a bit like inheriting an old family farm. There’s a long history in your water co-op, some unwritten rules, many logistics to keep track of, and things often need repair.
When it comes to moving money, clear policies for paying bills (accounts payable) and collecting member payments (accounts receivable) are good guideposts for your water co-op.
Policies don’t have to be complicated, and you don’t need to be a finance expert to understand them. Simple documents can create a framework to make sure bills are paid on time, members are billed fairly, and records are accurate and up to date.
Even if your rural water co-op hasn’t formalized these policies yet, you can help strengthen stewardship by asking the right questions and filling in the gaps.
POLICIES TO CONSIDER REVIEWING OR IMPLEMENTING
- Conflict of Interest Policy for Financial Transactions, which should include:
- A requirement to disclose when payments or reimbursements are made involving Directors, staff or related parties
- Expectations that prohibit self-approval of payments or reimbursements
- Expectations for what financial documentation needs to go in the Board minutes
- Internal Controls and Oversight Policy, which should include:
- The water co-op’s process for approving budget amendments, capital projects and emergency spending
- Control measures, segregation of duties and other expectations for handling financial transactions (accounts payable, receivable, etc.) at the water co-op
- Documentation and Record Retention Policy, which should include:
- All financial transactions requiring invoices, receipts, or contracts
- How the water co-op will record financial information and transactions, store it, and transfer the knowledge when new Directors, Treasurers or key staff need it
- Expectations for who will complete year-end financial reports, present to members for approval, and remit annual filings to the Director of Alberta Rural Utilities on time
- Accounts Payable Approval Policy, which should include:
- Who can approve payments and under what limits
- Controls such as a two-signature requirement for all payments
- Member Billing and Collection Policy, which should include:
- The frequency and due date cycles for billing members
- Procedures for handling late payments (reminders and then escalation steps)
- Bank Reconciliation and Review Policy, which should include:
- Monthly or quarterly reconciliation of bank accounts against the internal ledger
- Requirements for reviewing and signing off on account reconciliation
- Expense Authorization Policy, which should include:
- Spending thresholds for Treasurer, Board and staff if applicable
SUMMARY
Prudently managing the water co-op’s money is essential to:
- Maintaining operations and assets
- Building and upholding trust
- Making decisions that protect the organization and its members
Clear policies for accounts payable and accounts receivable give the Board a roadmap for approving spending, collecting member payments, and keeping accurate records.
Having good financial habits make it easier to spot errors and prevent mistakes and maintain a healthy cash flow for financial stability.
Having written guidelines ensures everyone knows their role, responsibilities, and limits.
Policies protect the water co-op, its members, and the people managing day-to-day finances, while giving Directors the confidence to provide effective oversight.
When everyone understands the rules and the processes are clear, we can focus on the bigger mission: delivering reliable services to members while planning responsibly for the future.