Creating an accountable plan for expense reimbursements in a non-profit organization is essential...
Converting Non-Profit Strategic Plans into Financial Roadmaps
Every non-profit organization starts with a lofty vision. A vision to make the world a better place by contributing towards the betterment of society. That vision once confined in the form of a strategic plan looks more achievable. However, the question remains how do we translate the strategic plan into actionable numbers? This is where budgeting comes into play. A strategic plan is usually for 5 years. Breaking that plan into smaller components would ensure its fulfilment.
Define financial objectives
The first step is determining financial objectives based on the strategic plan. It involves analyzing the goals and priorities outlined in the plan and translating them into quantifiable financial targets. This includes considering factors such as expected funding, cost of projects, and upfront investment requirement. By aligning financial objectives with the strategic plan, non-profit organizations can create a clear roadmap for fulfilling their strategic plan.
For example, your organization might decide to teach 1,000 children in the next 5 years. But for that 1,00 students to be able to study you need to fund teacher salaries, books, stationery and furniture. You would need to ascertain the total cost of teaching 1,00 children over 5 years by including inflationary impact as well. Consider setting aside some time to work on calculating the costs of the intended outcome and then deciding milestones along the way. This will then define the expected funding required to deliver on the plan.
Translate Goals into Numbers
You can convert strategic goals into budgetary items by evaluating the resources needed to achieve those goals. This includes identifying income sources such as grants, donations, and fundraising and estimating expenses associated with programs, operations, and overhead. It is crucial to consider financial constraints if the expected funding does not align with planned expenditure consider incorporating additional measures to ensure growth in funding. Using the example of teaching students we might calculate the total cost to be $1,000,000 then we need to ensure that we are fundraising for that. If we expect a gap in our funding, then we need to plan how we will bridge that gap.
Build a Financial Action Plan
The process of building a financial plan also known as a budget involves estimating both revenues and expenses year over year. Ideally, an organization would attempt to prepare a 5-year budget based on its strategic plan. This budget would then be revisited every year. Every year the organization would revisit the numbers and adjust for any revised trends, inflationary impact and its latest assessment of where the projects are leading. During the year a monthly or quarterly review of the budgets and readjusting that to reflect the current reality would also ensure that the organization is continuing to track itself. This process is known as forecasting where we adjust annual budget figures based on the current trends. So for teaching 100 students, the first-year budget might involve renting a space for a teaching facility and hiring teachers, school furniture, basic supplies and stationery. Volunteers might be recruited to campaign for education and to ensure that parents send their children to school. An estimate will have to be made regarding the timeline assuming it takes 3 months to get the arrangements in place then we need to budget for the next 9 months to have a fully operational school. We will also need to align our funding with the same.
Track performance regularly
Monitoring financial performance against the plan is crucial to track progress, identify variances, and make informed decisions. Regular reviews help evaluate the effectiveness of financial strategies and initiatives, enabling timely adjustments to stay aligned with strategic goals. By analyzing key financial metrics and conducting periodic reviews, organizations can proactively address challenges, capitalize on opportunities, and ensure that financial resources are optimally utilized to achieve their long-term objectives.
For example, if we budgeted for the school to be operational after 3 months and due to some unforeseen circumstances the opening is delayed by 2 months we will need to adjust our forecast for the same. This gives us more time to fundraise but at the same time, it would increase total project cost as well as timelines to achieving the strategic plan. These costs need to be incorporated in the rolling monthly forecast and discussed at the senior management level.
It's essential for the achievement of any long-term objective that a proper financial as well as operational plan is created. Planning is crucial to ensure that the activities of the organization are aligned with the long-term vision and mission of the organization. However, a plan will need to be adjusted as time progresses to reflect the current circumstances. Constant budgeting and forecasting is the way to ensure the successful accomplishment of a strategic plan. If you need help translating your strategic plan into an actionable financial plan get in touch and we will be happy to help.