Finance Strategy is often used by charities as another name for their strategic plan, but it should be in effect just part of the strategic plan, along with Values, Trust, Digital, Branding, Marketing, Quality Improvement, risks, and The responsibilities of Trustees. We have already looked at budgeting here and finance will probably be first and foremost if you are looking to turn a charity around.
charities tend to struggle with financial challenges. Tight budgets may mean you do not have an accountant as your finance manager and if you finances are tight, this may create a sense of anxiety in staff and impact on projects and retention.
Charity failure is not inevitable and here are 7 key things you can do to aid your Finance Strategy even if you are not an accountant to ensure you charity has a strong financial strategy
Maintain a reserve fund
Most charities work on a basis of putting all their money in to the services they provide. I am going to warn you against that, unless you are in a time of expansion after a period of stability, you should work to increase income over expenditure and pout it into a reserve fund. That reserve fund is there to protect you against economic challenges and the ups and down of business because despite having registered as a charity, you are a business. Be clear about how much you are going to keep in reserve and dont make it the be all and end all. Many charities lucky enough to have a reserve then become driven by risks averse finance where risk appetite is ) if the reserves are in any way touched. Remember they are there to be used, you are not bankers, you are a charity.
How much does it really cost to provide your charities services
For every dollar or pound you raise, know what it costs to generate it in terms of human resources, equipment, facilities and so on. Then compare those numbers to your revenue streams. If the balance is off, brainstorm ways to correct it.
Learn some accounts and finances
No accountant to help you? Then learn some basics quickly. The best thing however is to bring in a financial manager or experienced nonprofit accountant even if only on a day a week, and leave day-to-day bookkeeping for a bookkeeper or administrator. Understanding your finances enables you to better deliver the mission.
Your finance manager must be an innovator
So if you’ve been lucky and hired that accountant or finance manager, they should not be allowed to just do creating budgets and tracking spending. They should be encouraged to offer insights on issues relevant to delivering on your charity’s mission — technology, growth opportunities, infrastructure investments and more. A finance manager should be a multifaceted innovator, not someone who bores you to tears and then springs a financial challenge on your organisation.
Funding is paramount to your Finance Strategy
You need funding strategy and a good fundraiser who also encompasses development and marketing will help. Your understanding of shifts in donors willingness to give is essential. Remember with charitble donations, its OK to say no. Some individuals or groups want to give in a way that can be strain on resources or detract you from your mission. Make sure the donation is the right fit for your charity.
Do the hard work.
Finance is hard work to understand and to budget for and manager. Ask that your trustees are sent on a finance course. Get your senior managers to do the same. Be sure to innovate. I cannot stress enough that finance managers need to do more, waste is one area that is often not properly assessed.