Financial Management for Nonprofits
For nonprofits, strategic financial management is essential for ensuring that organizations remain fiscally sustainable during changing times. Budget cuts, misuse of funds, and other unanticipated liabilities pose a huge future risk. Having a solid plan for how to respond to unexpected turmoil makes a world of difference. Here are a few tips for steadily managing nonprofit finances.
Develop a detailed plan to secure internal finances. It’s imperative to know exactly where money is coming from and a plan for how it will be used. Here are a few questions to answer when developing a financial strategy (courtesy of KnowHowNonprofit.org).
Where are we now?
What are our plans for the future?
How will we get there?
Do we know what the risks are and how we will manage these?
How will we manage the competing demands of spending against savings needed?
In additional to those questions above,the following will help in planning a solid financial strategy for your organization. How will the organization generate revenue or will it solely rely on gifts from donors?
The Importance of Cash Reserves
Having a nest egg is key for nonprofits that wish to grow and be financially healthy for the long-term. Many organizations regularly face uncertainty due to economic conditions and need operating reserve balances to ensure future working capital is available.
A budget is a financial plan that serves as a monthly guide and is crucial in managing short and long term cash flow. With budgeting, nonprofits can focus on long, and short term goals while managing organizational growth.
We hope you find these tips useful in structuring your nonprofit’s financial strategy.