Community Interest Company banking: keep community money visibly separate

A Community Interest Company is still a limited company, but its community purpose and compulsory asset lock make the use of money especially important. The banking setup should make it easy for directors to show where income came from, who approved spending and how the money supported the CIC's stated community benefit.

Treat the CIC as its own company rather than an informal community project

Official CIC guidance says a Community Interest Company is a limited company with separate legal identity. It can enter contracts, own assets, borrow and raise finance in its own name. The bank account should therefore be held and operated for the CIC, not through a director's personal banking.

Customer revenue, grants, donations, payroll and supplier payments should flow through accounts the CIC controls. Directors may be reimbursed for legitimate business costs or paid where the arrangements are proper, but transfers to directors should be identified clearly rather than appearing as unexplained withdrawals from community funds.

Keep the compulsory asset lock visible when approving material spending

The Office of the Regulator of Community Interest Companies says every CIC has a compulsory asset lock designed to ensure assets and profits are used for the benefit of the community. Directors should therefore be able to explain how material payments fit the CIC's objects and community purpose.

This does not mean the CIC cannot pay normal business costs or commercial suppliers. It means directors should avoid treating the company as an ordinary private-profit vehicle. For major or unusual payments, keep board approval and supporting documentation so the commercial reason and community benefit remain clear.

Separate project-restricted money from unrestricted operating cash in the records

CICs often receive grants or contract funding tied to a particular project. Even when the bank does not require a separate physical account, the finance system should identify restricted or designated money clearly. Do not let a large grant make the general operating balance look healthier than it is.

If £80,000 arrives for a twelve-month youth project and £50,000 remains after three months, that £50,000 is not automatically available for unrelated overhead or another programme. Use project codes, subaccounts or separate accounts where they make control simpler, and reconcile grant spending against the funding agreement.

Set payment permissions around the CIC's governance, not around convenience

Decide which directors or staff can view accounts, create payments, approve payments and administer users. A small CIC may have two directors approving larger transfers while a project manager receives a limited card for routine expenses. Named credentials and clear limits are stronger than one shared login.

Keep the payment process workable when a director is unavailable. A community organisation should not miss payroll or a supplier deadline because the only authorised approver is on holiday. Build secure backup authority without giving every staff member broad banking access.

Use bank records to support the annual CIC report and company accounts

CIC guidance says directors must prepare an annual Community Interest Company Report, form CIC34, and file it with the accounts. The report demonstrates that the CIC continues to satisfy the community-interest test and explains how its activities benefited the community.

Banking records should make that story easy to support. Keep invoices, grant records, payroll evidence and major project spending linked to the accounting ledger. If the annual report says the CIC spent £120,000 delivering a community programme, the underlying transactions should be easy to trace rather than reconstructed from miscellaneous card entries.

Borrowing can support the mission, but repayments still need ordinary cash discipline

A CIC can borrow like other limited companies, subject to its constitution, lender requirements and the asset-lock framework. Use debt for a defined purpose and put repayments into the cash forecast. Social purpose does not make an unaffordable loan sustainable.

For example, borrowing £60,000 for a community café fit-out may be reasonable if contracted income and trading projections support the monthly repayment. If grant funding ends after twelve months, test whether trading income alone can service the debt. The community benefit should be supported by a business model that can keep the CIC solvent.

Keep grant funding, earned trading income and borrowing identifiable as separate cash sources. Directors should be able to explain whether a programme was funded by restricted grant money, general trading surplus or debt. That clarity helps both day-to-day control and the later CIC34 narrative, especially where the same bank account receives several types of income with different expectations attached.