Financial Planning for Your Non-Profit Introduction Double Bottom Line

Transcription

1 Financial Planning for Your Non-Profit Introduction Double Bottom Line Developed under cooperative agreement with HHS, HRSA, HAB Access Ryan White TA at careacttarget.org

2 Mission Bottom Line Progress of Mission Meeting needs of communities served

3 Financial Bottom Line Meeting budget targets Secure funding Effective Operational Infrastructure

4 Why plan? Long term financial planning gives you a guide for your organization s fiscal health. If an organization is fiscally healthy, it can better meet its programmatic goals.

5 Fiscal Health Strategic Business Plan Budget Integration

6 End of Introduction

7 Module 1: Long Term Strategic & Financial Planning

8 Module Objectives Importance & Objectives of a long term financial plan Common Components of a Business Plan Methodologies & Strategies for creation of long term business plans

9 What is a Business Plan?

10 Business Plan Road Map to your organization s future Financial data integrated with programmatic data Upfront thinking Growth Goals

11 Why create a business plan?

12 Importance of a Business Plan Reduce risk in decision making Aid in fundraising efforts Aid in allocation of resources Gives your organization a clear financial direction Sets revenue goals

13 Components of Your Business Plan Goals, Results & Challenges Market Conditions Revenue & Expense Projections

14 Goals, Results & Challenges Where does your organization want to be in 3-5 years? What are the expected accomplishments? What are the hurdles to accomplishing these goals & results?

15 Market Conditions Who are you serving? What portion of the general market are you trying to reach? Who is doing similar work in your area? Why are you different and/or better?

16 Revenue Projections What are your funding sources? Identification of new sources of revenue What resources will you need to complete your goals?

17 Expense Projections What are your staffing & infrastructure needs? What will new programs and objectives cost? Will there be expansion and what is its impact?

18 Practical Steps Decide time frame covered (3-5 years) Identify stakeholders Identify person responsible for creation of the document Create a timeline for completion and STICK TO IT

19 Forecasting Methodologies Qualitative Quantitative

20 Qualitative Forecasting Gut Instinct based on knowledge of market Opinions Forecasting is an art Challenges?

21 Quantitative Methodology Uses historical data to project Identifies previous trends Uses statistical models Challenges?

22 Mixture of the Two Methodologies Use qualitative methods to adjust quantitative models You know your market but gut instinct will not get you there alone Use qualitative methods to support and verify your expertise in your field

23 More Practical Steps Get input from program staff Do not let group thinking influence the outcomes Present to Board of Directors for approval

24 End of Module 1

25 Module 2: Budgeting

26 Module Objectives Importance of Annual Budgeting Potential Structure(s) of Annual Budgets Methodologies for creating an Annual Budget

27 What is an Annual Budget? Tool A means to an end

28 Budget - Purpose Annual plan to allocate resources in order to meet program objectives Sets balance between revenue and expense Conforms to long term plans Primarily an internal document

29 Budget Types Capital Budget Operating Budget Program Budgets

30 Budget Structure Should conform to existing systems and objectives Reflect organizational structure Reflect funder sources

31 Main Elements Chart of Accounts Cost Centers/Program Areas Revenue & Cost

32 Chart of Accounts Natural expense structure Reflects Accounting system structure Examples include salaries, fringe benefits, rent, office supplies, professional services

33 Cost Centers/Program Areas Budget should be divided according to organizational structure and activities Program activities divided in a way that makes sense for your organization Examples: General & Administrative, Fundraising, Education Program, Community Outreach, etc.

34 Revenue & Cost Budget should reflect areas of revenue & costs associated with each program activity (if relevant)

35 Sub-Divisions Departmental Budgets Grant Budgets Program Budgets

36 Creating your budget Create a timeline for completion of the budget Choose a structural template Identify staff roles & responsibilities

37 Staff Roles Identify one staff member to coordinate the budget process (finance staff if available) Creation is a group effort Include Program staff in process Make program directors responsible for specific budget areas Organization Head (Executive Director) makes final staff decisions Submit to Board of Directors for final approval

38 Goals & Objectives Clearly identify the year s major goals, objectives and activities Identify continuing activities Any new activities? Any activities eliminated?

39 Identify Major Assumptions What overarching assumptions impact the whole organization of multiple components/departments?

40 Creation Methodologies Line Item Budgeting Program Budgeting Zero Based Budgeting Grant Budgeting

41 Line Item Budgeting Uses previous year s data with changes based on percentage changes for each expense

42 Program Budgeting Focuses on Program expenses and income results

43 Zero Based Budgeting All activities are returned to zero each year and justifications given for each item each year

44 Grant Budgeting Budgets created for funders with restrictions on ways funds can be spent

45 Annual Operating Budget Usually consists of a mixture of these four methods

46 Additional Thoughts Delegation of budget authority to staff increases ownership of program and financial activities Make the internal budget as detailed as possible write down ALL assumptions Presentation to Board of Directors need not include every detail Have budget approved 1-2 months before beginning of fiscal year

47 End of Module 2

48 Module 3 Integration of Financial Planning

49 Module Objectives Integration of Financial Plans into Accounting & Financial Systems Methodologies of supporting & fostering budget accountability & reporting Typical roles of management & financial staff in financial planning

50 Financial Systems Integration Accounting System Financial Processes

51 Accounting System/Software Choose an Accounting System that can integrate all data points needed to track your budget Enter all budgets into the system This will facilitate reporting. Cross check accounting systems with other sources (member/fundraising databases)

52 Financial Systems Structure Clearly define roles of staff Code all revenues & expenses in a consistent format with your budget Require consistent coding methods

53 Roles of Staff Executive Management Finance Management Program Staff Board of Directors (Finance Committee)

54 Executive Management Responsible for overall fiscal health and delivery of mission Often has check signing authority (final control of systems) Assigns financial responsibility where appropriate Makes final changes/decisions to submitted staff budgets Takes action where/when appropriate Reports to Board of Directors Understanding & Awareness of Finance is essential

55 Board of Directors (Finance Committee/Treasurer) Responsible for big picture fiscal health Approves budget Reviews oversight reports including Budget to Actual reports Authorizes amendments to budgets

56 Program Management Staff Codes/Authorizes payment of invoices Responsible for oversight in assigned budget categories/cost centers Reviews periodic budget reporting and acts accordingly

57 Finance Staff Enforces & implements all financial internal controls Directs program & executive management staff in approved fiscal management procedures Produces reports for staff and board of directors Oversees operation of accounting system including proper coding of costs & revenues Coordinates Financial and Annual Budget planning processes

58 Reporting Why? Forecasting Analysis for changing course Accountability

59 Reporting Structures Budget to Actual Reports Dashboard Reports A-133 & Independent Audits IRS 990

60 Budget to Actual Reports Tracks revenues & expenses and correlates the data to budget numbers Provides a detailed picture of organizational and program health Provided to all staff with budget responsibility

61 Dashboard Reports At a Glance internal reports Includes key metrics in fiscal health of the organization to assess current fiscal health

62 A-133 & Independent Audits Assesses fiscal position of the organization Includes Schedule of Functional Expenses

63 IRS 990 Divides expenses into 3 categories: General & Administrative Fundraising Program Activities

64 What To Do With These Reports? Meet periodically as a group to review reports Use reports as a guide to change organizational goals/behaviors

65 Additional Thoughts Make sure your staff has a clear understanding of the financial systems and goals Use reporting to adjust behavior Sometimes more oversight is necessary

66 End of Module 3 Developed under cooperative agreement with HHS, HRSA, HAB Access Ryan White TA at careacttarget.org

67 ABC, Inc. Revenue 2007 Annual Budget General & Admin Fundraising Public Education Public Services Total Program Fees 90, , ,000 Restricted Grants 350, , ,000 Unrestricted Donations 50,000 50,000 Interest on Investment 200, ,000 Total Revenue 250, , ,000 1,340,000 Expenses Salary 50,000 50, , , ,000 Payroll Taxes 6,250 6,250 25,000 43,750 81,250 Fringe Benefits 7,500 7,500 30,000 52,500 97,500 Legal Fees 15,000 3,000 1,000 1,000 20,000 Financial Consultants 10,000 5,000 11,000 13,000 39,000 Program Consultants 10,000 75,000 15, ,000 Rent 15,000 6,000 50,000 60, ,000 Utilities 2, ,500 9,000 19,650 Insurance 3,000 2,000 9,000 10,000 24,000 Supplies 8,000 5,000 15,000 50,000 78,000 Travel 4,000 3,000 5,000 8,000 20,000 Capital Purchases 5,000 2,000 8,000 20,000 35,000 Total Expenses 126, , , ,250 1,295,400 Net Income 124,000 (100,650) 3,500 17,750 44,600

68 ABC, INC Grant Budget Federal Year 1 Year 2 Year 3 Year 4 Year 5 Total Personnel 150, , , , , ,370 Fringe 37,500 38,625 39,784 40,977 42, ,093 Travel 20,000 20,600 21,218 21,855 22, ,183 Equipment Supplies 20,000 20,600 21,218 21,855 22, ,183 Contractual 400, , , , ,204 2,123,654 Total 627, , , , ,257 3,331,483 Non Federal Match - Personnel 37,500 38,625 39,784 40,977 42, ,093 Fringe 9,375 9,656 9,946 10,244 10,552 49,773 Travel 5,000 5,150 5,305 5,464 5,628 26,546 Equipment Supplies 5,000 5,150 5,305 5,464 5,628 26,546 Contractual 100, , , , , ,914 Total 156, , , , , ,871 Total Expenditures 784, , , , ,821 4,064,353

69 ABC, Inc Annual Budget to Actual Report General & Admin Fundraising Revenue Budget Actual Variance Fav/Unf Budget Actual Variance Fav/Unf Program Fees Restricted Grants Unrestricted Donations 50,000 20,000 (30,000) 40% - Interest on Investment 200, ,000 (25,000) 88% - Total Revenue 250, ,000 (55,000) 78% - Expenses Salary 50,000 52,000 (2,000) 104% 50,000 20,000 30,000 40% Payroll Taxes 6,250 6, % 6,250 2,324 3,926 37% Fringe Benefits 7,500 7, % 7,500 3,000 4,500 40% Legal Fees 15,000 12,000 3,000 80% 3, ,440 19% Financial Consultants 10,000 11,000 (1,000) 110% 5,000 3,982 1,018 80% Program Consultants - 0% 10,000 2,900 7,100 29% Rent 15,000 16,000 (1,000) 107% 6,000 3,000 3,000 50% Utilities 2,250 3,000 (750) 133% % Insurance 3,000 2, % 2, ,014 49% Supplies 8,000 8,974 (974) 112% 5,000 1,300 3,700 26% Travel 4,000 3,000 1,000 75% 3,000 1,409 1,591 47% Capital Purchases 5,000 4, % 2,000 1, % Total Expenses 126, ,097 (97) 100% 100,650 41,317 59,333 41% Net Income 124,000 68,903 (55,097) 56% (100,650) (41,317) 59,333 41%

70 ABC, Inc. Revenue Program Fees Restricted Grants Unrestricted Donations Interest on Investment Public Education Public Services Budget Actual Variance Fav/Unf Budget Actual Variance Fav/Unf 90,000 89,756 (244) 100% 150, ,987 2, % 350, ,983 (24,017) 93% 500, ,573 (1,427) 100% Total Revenue 440, ,739 (24,261) 94% 650, ,560 1, % Expenses Salary Payroll Taxes Fringe Benefits Legal Fees Financial Consultants Program Consultants Rent Utilities Insurance Supplies Travel Capital Purchases Total Expenses Net Income 200, ,000 13,000 94% 350, ,383 (11,383) 103% 25,000 24, % 43,750 45,988 (2,238) 105% 30,000 28,474 1,526 95% 52,500 54,938 (2,438) 105% 1,000 1,100 (100) 110% 1, % 11,000 12,785 (1,785) 116% 13,000 14,576 (1,576) 112% 75,000 77,938 (2,938) 104% 15,000 16,394 (1,394) 109% 50,000 48,092 1,908 96% 60,000 58,983 1,017 98% 7,500 6, % 9,000 9,143 (143) 102% 9,000 9,134 (134) 101% 10,000 9, % 15,000 16,753 (1,753) 112% 50,000 45,098 4,902 90% 5,000 4, % 8,000 5,094 2,906 64% 8,000 8,273 (273) 103% 20,000 17,837 2,163 89% 436, ,009 10,491 98% 632, ,904 (7,654) 101% 3,500 (10,270) (13,770) -293% 17,750 11,656 (6,094) 66%

71 ABC, Inc. Revenue Program Fees Restricted Grants Unrestricted Donations Interest on Investment Total Revenue Total Budget Actual Variance Fav/Unf 240, ,743 2, % 850, ,556 (25,444) 97% 50,000 20,000 (30,000) 40% 200, ,000 (25,000) 88% 1,340,000 1,262,299 (77,701) 94% Expenses Salary Payroll Taxes Fringe Benefits Legal Fees Financial Consultants Program Consultants Rent Utilities Insurance Supplies Travel Capital Purchases Total Expenses Net Income 650, ,383 29,617 95% 81,250 78,990 2,260 97% 97,500 93,712 3,788 96% 20,000 14,255 5,745 71% 39,000 42,343 (3,343) 109% 100,000 97,232 2,768 97% 131, ,075 4,925 96% 19,650 19, % 24,000 22,673 1,327 94% 78,000 72,125 5,875 92% 20,000 14,492 5,508 72% 35,000 31,655 3,345 90% 1,295,400 1,233,327 62,073 95% 44,600 28,972 (15,628) 65%

72 ABC, INC: financial performance measures budget/goals Q Q Q Q ) total revenue for the period $2,255,565 $1,874,372 $1,824,093 $2,080,129 $451,912 $461,409 $479,335 $472,424 2) total expense for the period $1,963,947 $2,003,874 $1,878,800 $2,079,265 $501,783 $437,495 $449,103 $460,141 net revenue $291,618 ($129,502) ($54,707) $864 ($49,871) $23,914 $30,232 $12,283 3) net revenue to total revenue for the period 11.9% -6.9% -3.0% 0.0% -11.0% 5.2% 6.3% 2.6% 4) % revenue change over prior period 27.4% -16.9% -2.7% 11.0% 4.7% 2.1% 3.9% -1.4% 5) 6) 7) % spending change over prior period -0.4% 2.0% -6.2% 3.8% 2.2% -12.8% 2.7% 2.5% % of accounts receivable over 90 days 19.6% 20.1% 21.3% 19.0% 22.6% 20.7% 20.0% 5.4% net cash flow for the period (thousands) ($14) ($171) $21 na $16 $40 $0 ($30) 8) cash as a % of operating expenses 16.5% 7.6% 9.2% na 26.4% 39.4% 38.5% 31.1% 9) 10) unrestricted cash as a % of total cash 56.6% 32.5% 36.0% na 19.5% 12.1% 26.7% 5.1% ratio of current assets to current debt: X: na ) total Senior Associate fte's ) revenue per SA $214 $219 $54 $55 $57 $56 Formulas and Bechmark Levels for Each Metric 1 = total revenue from statement of activities - note that these figures do not include in-kind revenue 2 = total expense from statement of activities - note that these figures do not include in-kind expenses 3 = net revenue total revenue: 7.7% or > establishes a one month reserve 4 = (total revenue current period - total revenue prior period) total revenue prior period: should generally be > than spending change 5 = (total expense current period - total expense prior period) total expense prior period 6 = AR > 90 days: ABC goal is to keep this at or below 20% 7 = net cash flow for the period: should be positive over the long term 8 = checking account balance total expenses: 8.3% or > for the year and 33.3% or > for the quarter means's one month's expenses are held in reserve 9 = unrestricted operating cash balance total checking account balance (exlcuding investment account): high %'s indicate more cash from fee for service activities and low %'s indicate higher grant or deposit balances 10 = current assets current liabilities: a ratio of 1:1 or greater means total assets exceed total liabilities 11 = total Senior Associate full time equivalents

73 ABC, INC Employee Timesheet Employee Pay Period Date General & Admin Fundraising Public Ed Public Serv Vacation Holiday Sick Total Hours Total Hours Percentage Employee Signature Supervisor Signature

74 ABC, INC Employee Expense Reimbursement Name: Department: Date: Supervisor: Expense Description Account Cost Center Class Amount Total: Employee Signature: Authorization Signature: