In the NFP sector, what financial tools will change your day-to-day working life?
The not for profit sector is vital for Britain’s society in many ways – and without it, there’d certainly be a black hole where many current service delivery objectives are being met. And as a not for profit finance leader, what’s needed to check that you’re managing money well enough to keep the organisation sustainable for the long term? This article will explore the answers to these important questions and more.
Balance sheets
It may come as a surprise to the conscientious not for profit finance leaders out there, but it’s actually the case that some not for profits keep pretty terrible records when it comes to money. High profile problems such as the decline of Kids’ Company reveal that financial mismanagement could be going on anywhere in this sector – and losing track of income and expenditure is not uncommon. As a finance leader for a charity, the first thing to do is to check that the organisation has basic financial reporting functions such as balance sheets in place, and then bedding these in over time.
Timesheet tracking
Employees are often the best asset that a not for profit has – meaning that they need to be both nurtured and managed in order for the organisation to get the best out of them. And in an age of unprecedented funding squeezes on many not for profits, it’s also the case that contractors and freelancers are often being used to plug the gaps in a cost-effective way. As a result, effective timesheet software which allows you to check that your employees are working to their best of their abilities and to gather data on what areas are efficient is essential. One of the key areas to keep an eye on is volunteers – not only keeping a track of how much they are working, but also what they are working on.
Financial models
For a private sector business, income streams are often relatively predictable once a firm is established. That’s because the customer base of that firm can usually be worked out with some degree of certainty. But for a not for profit, the situation can change wildly. Grants can come and go, for example, while individual donations can fluctuate. Unless you have a large enough endowment with a predictable income, it’s likely that uncertainty is a common problem.
Step forward financial models. This sort of tool can intelligently analyse where your income streams have come from in the past, and what they might begin to look like in the future. They can produce various different scenarios which explain what could happen if a certain outcome – such as a grant loss – occurred, meaning that you can integrate this into your strategic, C-suite level planning.
Not for profits are integral parts of civil society, but they are only able to survive with adequate financial plans on side. As this article has shown, everything from timesheet tracking to financial modelling is important – and can be achieved with the right tools.
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