3 Strategies to Build Your Organization’s Financial Capacity
Let’s face it—budget planning can cause much stress and anxiety for nonprofits.Most organizations face frequent budget cuts, thus creating organizational uncertainty.
How could we possibly achieve the same mission impact with less resources?
But what if our organizations could engage in a more thoughtful and systematic practice to build our organizations’ financial capacity without making this tradeoff? Building your organization’s financial capacity involves investing in solid financial systems, but also engaging in more strategic board governance and leadership.
Here are three strategies your organization can use to build its capacity to plan for more, not less resources to meet its mission.
1. Develop a more accurate overall budget
In collaboration with your organization’s finance committee, create a more accurate overall budget by using project or program-based budgets. For each program, break down its actual revenue and expenses, including its necessary overhead, such as your staff’s time devoted to office administration, marketing and fundraising for such program.
Calculating overhead can be challenging. Instead of assigning a random percentage to your programs, ask your employees to start tracking how they spend their time so that the organization can make more accurate allocations. Program-based budgets will allow your organization to make more precise cash flow projections and more appropriate fundraising goals for the year so that your organization can plan to accomplish more, not less.
2. Utilize a dashboard to communicate financial updates
A dashboard is a helpful tool for board and staff to stay abreast on the organization’s finances. A dashboard is a snapshot of the organization’s progress towards its major financial, fundraising and mission impact goals. It can be especially helpful for those board or staff members who are uncomfortable reading large spreadsheets.
A simple dashboard can be created when linking formulas through Microsoft Excel. Once you have a template built, you simply update the numbers in the formula tab and the visuals and graphics on the dashboard tab will update automatically. It is a great tool for building understanding and stimulating greater discussion around the organization’s finances, whether you are a board or staff member certified as a professional accountant or a total novice.
3. Engage board and staff in stewarding finances
Your organization’s finances should be discussed at every board meeting, but they should also be discussed in select staff and committee meetings, as appropriate. When board and staff are educated about the organization’s finances, they take greater ownership over their own departments’ budgets and often recommend creative, cost-saving solutions. This greater sense of ownership in turn fosters a greater sense of commitment and therefore improved morale—board and staff really feel that their opinion and suggestions contribute to the organization’s well-being. Conversations about the organization’s finances do not have to elicit fear and anxiety. Perhaps talking about them more could help your organization shed this mentality.
Implementing program-based budgets, a dashboard and engaging board and staff in stewarding your organization’s finances will position your organization to make more educated decisions about its finances. Greater engagement will also open up more opportunities for board giving and getting, as well as opportunities to brainstorm cost-saving solutions. These three strategies will create more valuable resources to reach your organization’s mission, allowing it to work smarter, not harder.