Building capacity with strong financial processes
By Lee Rouse
Community Advancement Network Consultant
Is it time for a Financial Fitness Assessment?
Many in the nonprofit world are starting new fiscal calendars or are preparing for the next year ahead. As preparation plans are underway, it might be time to brush off the resolutions from last year and opt for a Financial Fitness Assessment. In a recent poll, nonprofit leaders were asked, “What keeps you up at night?”. The majority answered “keeping the doors open” or “being able to make payroll”.
The fact is many nonprofits are struggling to find sustainable revenue sources and are sometimes forced to operate on a month to month basis as they await fund raising dollars or grant money, not a model for sustainability or for managing sleepless nights. Assessing your financial and fund development practices and working on plans to mitigate your risk and increase the stability and predictability of your revenue sources is a must. Work through our Financial Fitness Assessment and see how robust your systems are.
- Do you have a formal Fund Development Plan that clearly identifies short and long term revenue goals for the next 5-10 years based on your mission and vision? Does it include a compelling case statement and detailed action plans and metrics for each revenue source?
- Do you have a diversity of revenue sources? Do you analyze your mix of public and private funding at least annually? Do you project future gains and losses in various sources of revenue? Have a contingency plan in place for responding to unexpected reductions or increases in any of these resources?
- Do you have HR policies and agreements in place that mitigate financial/legal risk for the organization?
- Do you have at least 60 days and preferably 6 months of “days cash on hand” to cover revenue set-backs or emergencies?
- Do you produce financial statements/annual reports/documentation regularly that are reviewed by both the board of directors and a CPA? This includes an annual audit.
- Do you have a strategic budgeting process that is monitored on a regular basis to determine/evaluate/respond to any variations?
- Do you have formal internal controls and policies governing all financial operations and decision making? (e.g. separation of responsibilities with respect to receiving, recording and depositing checks, purchasing, expense accounts, management of lines of credit, endowment funds, etc.)
- If a line of credit exists, does it hit $0 at any point during the fiscal year?
- Do you understand and plan for cash flow needs and fluctuations? If expenses regularly exceed revenues and show a deficit, is there is a realistic plan to decrease these liabilities?
For more information, visit the Community Advancement Network website.