Rise Above Uncertainty
Updated: Jul 7, 2019
Gaining Clarity with a Quick Financial Planning Strategy
If you joined me for the April blog post, “You can be a Financial Analyst for your Organization,” you may recall our comparative analysis exercise. Now that we’re halfway through the year, we’re going to roll up our sleeves and repeat the exercise with a more emphasis on strategic planning.
The Goal this month is:
To interpret the financial activity of your organization from Jan - Jun
To analyze each program separately, plus the administrative and fundraising activity
To create a S.M.A.R.T. ( Specific, Measurable, Attainable, Realistic, and Timely )and detailed action plan to recover any loss in each category with loss
I’ll kick off this exercise by introducing you to a pseudo nonprofit, “Dignity Restoration Outreach,” that serves the local homeless community by providing weekly dinners, life skills workshops, counseling and workforce training to serve up to 270 homeless adults and children. This organization also has Spring Fundraiser which includes a Community Breakfast and Carnival which raises between $40,000 - $50,000 each year.
Below is a description of the variance based on the organizational budget versus actual financial report. Each financial category that has a 25% variance, (either positive or negative ranging below 75% or above 125%) has a documented description of the variance.
Here’s the exercise in action so you can get an idea of how to apply this to your organization. After analyzing the Budget vs. Actual Financial report, the following 3 variances were documented:
Direct Contributions = 68% of Budget
($59,658.75) - under budget
Note - There was a significant drop in recurring pledges at the beginning of the year $10,800 (18 donors @ $100 per month) did not renew, plus 4 major donors that pledge $10,000 per year did not renew
Non-Governmental Grants = 40%
($45,000) - under budget
Note - An additional $35k grant from ABC Foundation will arrive in early July
Personnel = 72%
($17,614.76) - under budget
Note - Program Assistant resigned from her position in May and the position is expected to be filled in August.
Once you’ve identified and documented the reason for each variance, you’ll want to complete the following steps.
Determine if a mid-year revised budget needs to be drafted for Board Approval
Create Your Action Plan to Recover the Loss & Include the Applicable Staff and Board Members to help support the plan.
Include a timeline for your milestones and to review progress.
This strategy for financial planning has proven to eliminate uncertainty concerning the financial future of multiple organizations I've worked with. It is critical to take a deep dive and review the budget vs. actual financial reports regularly and make adjustments to financial planning on a quarterly basis.
Stay tuned for a video tutorial later this month that will walk through this step-by-step process and provide more insights on this Financial Planning Strategy using a 25% variance rate.