This month is the final article in our series on building strong financial leadership models within your organization. Throughout the last several months, we have talked about areas to focus on that relate to financial planning, monitoring, operations, and governance.
Last month, we started focusing on governance and the strong financial leadership an organization should expect from their board of directors. Furthermore, we talked about creating dashboards as a summary of financial data and financial performance relating to key performance indicators. These dashboards can assist in changing the conversation to planning the future as opposed to just reviewing performance.
This month, we will discuss why boards need to direct the conversation to sustainability if they want to ensure the continuing success of an organization. Boards should be involved in setting goals and be reviewing the performance regularly, using the experience as a step towards shifting the mindset from oversight to sustainability. This will help shape the focus on what is necessary for long-term success.
To plan and prepare for the future, setting goals for profit is imperative. Nonprofits, as well as for-profit organizations, should evaluate the effectiveness of all programming on an on-going basis. Constant refinement of existing programs and research for new ones needs to happen to ensure the continued success of the organization. THIS TAKES MONEY! You can start refining by asking if the existing programs are all carrying their weight financially? If not, then explore options for partnering with another nonprofit that may have a similar program and get that one “off the books.”
Develop on-going financial projections, keeping in mind the budget and the cash projection examples we discussed in an earlier article. These projections will not only help you know how the organization has performed to date in comparison to the budget, but also how it is expected to complete the following:
- Perform status quo
- Find new funding streams
- Lose a budgeted funding stream
- Respond to impact(s) of staffing changes
NFP Partners does projections for a couple of clients. We use the budget as a basis for the forecasting; however, we also use it as an opportunity to incorporate changes that have occurred since the budget season. This can be turned into an internal management tool that will assist in making informed financial decisions.
Additional tips on how to make informed financial decisions are as follows:
- Project to the end of the current fiscal year and develop an on-going, rolling projection. Provide the projections to the board so they are invested in the future financial performance of the organization
- Continue to grow and develop your organization’s key business models
- Ensure that your message doesn’t get old and do so by being innovative
- Set aside funds to explore new business opportunities, at the very least personnel resources or contractors to develop an idea that can be market tested to determine the validity. Use resources to create a business plan for that new business idea to quantify the effect the program would have on the organization’s bottom line.
In effect plan, use the past as your guide but develop the future.
To find every article in our series, A Guide to Strong Financial Leadership, click here.
Thank you for reading,