Strong financial management propels purposeful growth.
Financial management can simply mean organizing financial data and producing financial reports. Or, it can fuel exceptional mission impact.
KAF Catalyst is a team of financial and fundraising experts. We can help you develop, maintain or reframe your business model and accompanying financial policy to fuel purposeful growth and rocket your organization to sustainability.
Financial management in the non-profit sector is centered on stewardship of donated resources.
Does your fiscal policy reflect the gratitude you have for your donors?
There is no one size fits all for financial management policies and procedures. Your organization's policies and procedures will have specific requirements depending on your scope, size, staffing and business model.
Maintaining thoughtful and relevant policies and procedures is critical to sound financial management.
If your organization has outgrown your policies and procedures or if they weren't well-organized to begin with, let KAF Catalyst help. Investing in this documentation process is important to your future success (and it comes with a pretty small price tag).
Here are some of the things we can help with
Manage cash flow, project quarterly
We all understand that annual budgeting is an essential element of financial management. Good news! The budgeting process doesn't have to be brutal. In fact, it can be energizing, unifying and, dare we say ... fun! (Roll those eyes but stay with us). When we have a really inspiring narrative that outlines mission and vision-based core activities and the freedom to create revenue streams that not only support these activities but embody them, budgeting becomes exciting.
Working with less becomes a challenge we are motivated to meet because it means we're leaner, meaner and even more fierce.
Quarterly projections are essential too. Programming, strategic opportunities, obstacles - these things change. Projecting on a quarterly basis can be a way to capture "up-to-the-moment" thinking about our core activities and fundraising within financial management. We can't let go of our vision (nor can we let go of that bottom line), but we can get creative and re-think our means and strategies to meet it differently.
Let KAF Catalyst guide your budgeting (visioning) process this year. You will accomplish so much more when your team feels good.
Manage the right risks
The financial experts at KAF Catalyst will assess your organization's risks holistically.
Income diversification. To diversify or not to diversify, that is the question. We know that diversification in a financial portfolio can hedge against risk. But the same doesn't hold true when evaluating a non-profit's sources of revenue. More revenue streams means more capacity required to execute them properly. So the question, really, is to diversify or to consolidate?
Attracting and retaining talent. High turnover plagues the nonprofit sector, especially in fundraising roles. Are your executive compensation packages competitive? Or is your employee benefit program high cost of living driving your talent to look elsewhere? Well-constructed executive compensation packages and employee benefit programs are critical to attracting and retaining a talented, dedicated team.
Enterprise risk management (ERM) in the nonprofit sector is growing as scrutiny from donors and watchdog agencies increases. An effective ERM program keeps organizations focused on mission-based objectives, engages the executive team and enhances the board's oversight. Importantly, industry watchers consider your ERM program when factoring your overall rating. ERM is not for projects - it is a continual process.
The great debate: Restricted versus Unrestricted
General Operating. Most individual gifts are unrestricted.
Donor-imposed restrictions that are fulfilled through passage of time or by performing defined activities. Most grants for programs or campaigns are temporarily restricted.
These funds are restricted by the donor in perpetuity. The intent is often that the principal balance of the contribution will remain as an investment forever and the non-profit will utilize the interest for a designated purpose (i.e. an endowment).
Finance departments may interpret these definitions more strictly or less. The important thing to remember is that the department that is raising the money and the department that is accounting for the money and the department that is spending the money are all on the same team.
If you are feeling tension between departments, ask yourself these questions: Are you developing effective grant proposals? Is your finance operation adequately staffed? Does your programmatic team have adequate resources to create high quality, mission-centered programs? Where can we simplify and evolve?
You may need a fresh set of eyes. And that's ok. We've got you.
Make a plan for reserves
The point of staying focused on budget variance is that it helps us anticipate the future. In 2009, organizations who managed their cash flow diligently were less affected by the recession because they had a cushion to help them meet shortfalls.
Financial planners recommend that individuals and families save 3 to 6 months of expenses in an emergency fund. Does your non-profit has a reserve fund?
It will only appear if you strategically plan for it. If your organization is running a deficit, a reserve fund isn't your priority.
Here are some quick guidelines:
- Determine your reserve goal (at very least, 1 payroll including taxes)
- Develop a realistic income and expense budget that will result in surplus
- Commit to designating unrestricted surpluses to your reserve fund first before other non-essential projects are undertaken
- Once you build your reserve, be intentional and strategic in using it. If you find yourself dipping into it to recover income shortfalls on a regular basis, it is time to re-think your budget.