Cashflow Management. Annemarie Moore Group Treasurer Plan International

Transcription

1 Cashflow Management Annemarie Moore Group Treasurer Plan International

2 About Plan Plan International works in more than 50 developing countries across Africa, Asia and the Americas to promote child rights and provide better opportunities for millions of children. Our 21 National Organisations raise awareness and provide funding and expertise for our programmes. Funding is both restricted and unrestricted. 2

3 Australia Belgium Canada Denmark Finland France Germany Hong Kong Ireland Italy Japan Korea Netherland s Norway Spain Sweden Switzerland USA UK The Plan Funds Flow World Plan National Organisations (NO) established under host country regulatory requirements Field Country National Organisations Colombia India Donations to Plan International Inc or FCNOs Plan International Inc Plan Inc Asia Branches (ARO) Plan Inc Central & South America Branches (ROA) Plan Inc West Africa Branches (WARO) Plan Inc East & Southern Africa Branches (RESA) Plan Inc Head Office Branch (IH) Plan Ltd (Subsidiary) Providing Head Office services 3

4 What You Said About Cash Management General NGO Cash Management Difficulties Gaps in timing of expenditure and income including donor delays and general irregularity, and dealing with pre-financing requirements The need for a system for monitoring cashflow planning and liquidity Volatility in programming and difficulties in making cashflow predictions Managing when cash is tight and cash reserves are low 4

5 Cash Management in the New Non-Profit World Forecasting Lumpy payments and timings Grants and Contracts v unrestricted Partner Advances Cash in the Bank Lower cash reserves Prefinancing Lower unrestricted Managing Outflow Controls over payments Liquidity management 5

6 How Plan Manages Cash Our Tools Knowledge Robust and regularly updated forecast Trend Analysis Flow Management Forecasting Historic analysis Robust process Back up plan Reserves Governance Policies 6

7 forecasting

8 Cash Flow Forecasting and Management Why is it important to forecast? Governance approving budgets ensuring the organisation remains a going concern Planning liquidity Identify shortfalls and low points of funds in advance Spot peaks in bank balances (which may affect counterparty limits) enables action (rephasing of spend, raise additional funds) Visibility on prefinancing requirements Currency Forecasting currency inflows and outflows Supports hedging and currency management programmes Programme Cash assurance provides programming confidence 8

9 Let s Find Out Who s cashflow forecast is accurate? 9 The contents of this presentation should not be taken as legal advice

10 Robustness of Forecast Actual Payments compared to Forecast Payments Budget Payments Actuals Prior year Jul Aug Sep Oct Nov Dec Jan Feb Mar A cash flow forecast should reflect reality.....but generally ours doesn t. Outflow forecast from the field tends to be over optimistic, especially in the first half of the year Programme tend not to build in the inevitable delays to spend For instance Taking a period of Jul to Oct our field were forecasting to spend 10m more each month than past trends The actuals turned out in line with trends and not the over optimistic forecast 10

11 What can we change to improve our forecasting? What s uncontrollable Real world events What s controllable? having a system regularly updated forecast Actuals to forecast comparison Reconciliations to income and expenditure forecasts Appropriate skilled staff and experience Education 11

12 Inputs into a Robust Forecast In order to produce a reliable forecast Plan International needs: To receive regular updates Income and expenditure side To receive reliable data Income and expenditure forecasts Historic cash flows and trend analyses, Comparisons to actuals to establish accuracy of forecasts Adjustments for seasonality,cycles and other interruptions to programme (rainy season, hurricane season, IT system implementation, community calendar or internal restructures may slow down programme) Adjustments for disasters (earthquakes etc.) To issue good guidance notes on how to complete the forecast To understand the data and what it represents Liaise with departments and country offices Challenge assumptions in the forecast 12

13 Determining a Robust Forecast Actual Payments compared to Forecast Payments Budget Payments Actuals Prior year Jul Aug Sep Oct Nov Dec Jan Feb Mar Was this inaccurate forecasting or was it a prefinancing requirement? Sources of data to help determine which. 1. What was the input into the numbers? 2. Question the countries 3. Is this what you will spend i.e. committed to, or is it a) What you want to spend? b) What you have available to spend i.e. budget? 4. Why the deviation from the prior period? 13

14 Factors Influencing Reliability Budget Process and Mechanism Type of organisation Grant Sponsorship Disaster Extent of working with partners 14 The contents of this presentation should not be taken as legal advice

15 Cash Reserves 15 The contents of this presentation should not be taken as legal advice

16 What is Optimal for Cash Reserve? Limitations for an NGO Yet Generally we do not raise funds in financial markets to meet shortfalls NGOs suffer emergencies/disasters We no longer have regular inflows and our forecasts tend to be inaccurate Limit to how much cash we can hold due to our charitable status We need cash/liquidity to Transact Send to countries To meet known obligations Meet contingencies Disasters Downturn in income Delays in donor payments Disallowables 16

17 So what is Optimal? Considerations when determining optimal How much do we need to meet contracted obligations? Reserves Policy How long would it take to unwind our programmes? What drains do we have on our funds? Prefinancing Advances to partners Reduced unrestricted How reliable is our cash forecast? How often do we forecast? How extensive is our emergency programming? Are we a disaster organisation? 17

18 Going out the door

19 How to manage the Cash Leaving the Building What is the Funds request format? Control? Regularity? timetable or just in time approach 19

20 Back to your Issues 20

21 Back to Participant Issues Gaps in timing of expenditure and income including donor delays and general irregularity, and dealing with pre-financing requirements Manage it Forecast, reforecast, cash budget and be sceptical Determine an optimum balance and hold cash reserves The need for a system for monitoring cashflow planning and liquidity, and dealing with volatility in programming and difficulties in making cashflow predictions Introduce forecasting/cash budgeting/cash reforcasting Calculate your deductibles i.e. GIK, depreciation and reconcile to income/expenditure budget Reforecast regularly Include it as regular reporting from your offices so as you can consolidate Prepare a routine cashflow forecast and historic cashflow to demonstrate trends Keep those in governance aware Country financial skills: Be sceptical when reviewing data Layout templates as much as possible pre-populated with formulas and built in reconciliations Have the data reviewed as much as possible Managing when cash is tight and cash reserves are low: maintenance of a cash reserve Draw up and obtain buy-in for a policy to build up a buffer 21

22 Answers 22

23 Over to you? Do you have the answers? What techniques do you use to obtain forecasting accuracy? Is there a tool here that you will adopt? Is prefinancing an issue for you? Do you have a prefinancing policy? Do you advance funds to partners? If so for how long? Do you have a minimum cash balance policy? 23