40. Nonprofit Financial Planning
1/28/2012
Bagian Kedua
d
NONPROFIT FINANCIAL PLANNING
G usta a f A. Lumiu
Financial Planning for Your Non‐Profit
Introduction “Double Bottom Line”
1
1/28/2012
•Mission Bottom Line
1.Progress of Mission
2.Meeting needs of communities served
•Financial Bottom Line
•Financial Bottom Line
1.Meeting budget targets
2.Secure funding
3.Effective Operational Infrastructure
2
1/28/2012
Why plan?
Long term financial planning gives you a
guide for your organization’s fiscal health.
If an organization is fiscally healthy, it can
bette eet ts p og a
better meet its programmatic goals.
at c goa s
•Fiscal Health
Strategic Business Plan
Budget Integration
3
1/28/2012
Long Term Strategic & Financial Planning
Objectives
1. Importance & Objectives of a long term
financial plan
2. Common Components of a Business Plan
Methodologies & Strategies for creation
Methodologies & Strategies for creation
of long term business plans
1.
• Business Plan
Business Plan
1.Road Map to your organization’s future
2.Financial data integrated with
programmatic data
3.Upfront thinking
4.Growth Goals
h
l
4
1/28/2012
• Importance of a Business Plan
1.Reduce risk in decision making
2.Aid in fundraising efforts
f
ff
3.Aid in allocation of resources
4.Gives your organization a clear financial
direction
5.Sets revenue goals
g
• Components of your Business Plan
1.Goals, Results & Challenges
2.Market Conditions
3.Revenue & Expense Projections
5
1/28/2012
• Goals, Results & Challenges
1.Where does your organization want to be
in 3‐5 years?
2.What are the expected
accomplishments?
3.What are the hurdles to accomplishing
these goals & results?
these goals & results?
•Market Conditions
1.Who are you serving?
2.What portion of the general market are
you trying to reach?
3.Who is doing similar work in your area?
4.Why are you different and/or better?
y
y
/
6
1/28/2012
•Revenue Projections
•Revenue Projections
1.What are your funding sources?
2.Identification of new sources of revenue
3.What resources will you need to
complete your goals?
•Expense Projections
1.What are your staffing & infrastructure
1
Wh t
t ffi & i f t t
needs?
2.What will new programs and objectives
cost?
3.Will there be expansion and what is its
impact?
7
1/28/2012
•Practical Steps
1.Decide time frame covered (3‐5 years)
2.Identify stakeholders
3.Identify person responsible for creation
of the document
4 Create a timeline for completion and
4.Create a timeline for completion and
STICK TO IT
Budgeting
Obj ti
Objectives
1.Importance of Annual Budgeting
2.Potential Structure(s) of Annual Budgets
3.Methodologies for creating an Annual
budget
8
1/28/2012
•Budget ‐ Purpose
1.Annual plan to allocate resources in order to
1
A
l l t ll t
i
d t
meet program objectives
2.Sets balance between revenue and expense
3.Conforms to long term plans
4.Primarily an internal document
•Budget types
1.Capital Budget
2.Operating Budget
3.Program Budgets
9
1/28/2012
•Budget Structure
B d t St t
1.Should conform to existing systems and
objectives
2.Reflect organizational structure
3.Reflect funder sources
•Main Elements
•Main Elements
1.Chart of Accounts
2.Cost Centers/Program Areas
3.Revenue & Cost
10
1/28/2012
•Chart
Chart of Accounts
of Accounts
1.Natural expense structure
2.Reflects Accounting system structure
3.Examples include salaries, fringe
benefits, rent, office supplies,
professional services
f i
l
i
•Cost Centers/Program Areas
1.Budget should be divided according to
1
Budget should be divided according to
organizational structure and activities
2.Program activities divided in a way that
makes sense for your organization
3.Examples: General & Administrative,
F d i i Ed ti P
Fundraising, Education Program,
Community Outreach, etc.
11
1/28/2012
•Revenue & Cost
1.Budget should reflect areas of revenue
& costs associated with each program
activity (if relevant)
•Sub‐Divisions
1.Departmental Budgets
2.Grant Budgets
3.Program Budgets
12
1/28/2012
•Creating your budget
C ti
b d t
1.Create a timeline for completion of
the budget
2.Choose a structural template
3.Identify staff roles & responsibilities
y
p
•Staff Roles
1.Identify one staff member to coordinate the
budget process (finance staff if available)
2.Creation is a group effort – Include Program
staff in process
3.Make program directors responsible for
specific budget areas
4 Organization Head (Executive Director) makes
4.Organization Head (Executive Director) makes
final staff decisions
5.Submit to Board of Directors for final approval
13
1/28/2012
•Goals & Objectives
1.Clearly identify the year
1
Clearly identify the year’ss major goals,
major goals
objectives and activities
2.Identify continuing activities
3.Any new activities?
4.Any activities eliminated
?
•Identify Major Assumptions
y
j
p
1.What overarching assumptions impact
the whole organization of multiple
components/departments?
14
1/28/2012
•Creation
Creation Methodologies
Methodologies
1.Line Item Budgeting
2.Program Budgeting
3.Zero Based Budgeting
4.Grant Budgeting
•Line Item Budgeting
Uses previous year’s data with changes based
on percentage changes for each expense
•Program Budgeting
P
B d ti
Focuses on Program Expenses and Income
Income results
• Zero Based Budgeting
All activities are returned to zero each year and
justifications given for each item each year
• Grant Budgeting
Budgets created for funders with restrictions on ways
funds can be spent
15
1/28/2012
1.Delegation of budget authority to staff
increases ownership of program and financial
activities
2.Make the internal budget as detailed as
possible – write down ALL assumptions
3.Presentation to Board of Directors need not
include every detail
4 Have budget approved 1 2 months before
4.Have budget approved 1‐2 months before
beginning of fiscal year
•Integration of Financial Planning
g
g
Objectives:
1.Integration of Financial Plans into Accounting
& Financial Systems
2.Methodologies of supporting & fostering
budget accountability & reporting
3T i l l
3.Typical roles of management & financial staff
f
& fi
i l ff
in financial planning
16
1/28/2012
•Financial Systems Integration
•Financial Systems Integration
1.Accounting System
2.Financial Processes
•Accounting System/Software
1.Choose an Accounting System that can
integrate all data points needed to track your
budget
2.Enter all budgets into the system – This will
facilitate reporting.
3 Cross check accounting systems with other
3.Cross check accounting systems with other
sources (member/fundraising databases)
17
1/28/2012
•Financial Systems Structure
•Financial Systems Structure
1.Clearly define roles of staff
2.Code all revenues & expenses in a
consistent format with your budget
3.Require consistent coding methods
•Roles
Roles of Staff
of Staff
1.Executive Management
2.Finance Management
3.Program Staff
4.Board of Directors (Finance Committee)
18
1/28/2012
•Executive Management
1.Responsible for overall fiscal health and delivery of
mission
mission
2.Often has check signing authority (final control of
systems)
3.Assigns financial responsibility where appropriate
4.Makes final changes/decisions to submitted staff
budgets
5 Takes action where/when appropriate
5.Takes action where/when appropriate
6.Reports to Board of Directors
7.Understanding & Awareness of Finance is essential
•Board of Directors (Finance
Committee/Treasurer)
1.Responsible for big picture fiscal health
2.Approves budget
3.Reviews oversight reports including
Budget to Actual reports
4 A th i
4.Authorizes amendments to budgets
d
t t b d t
19
1/28/2012
•Program Management Staff
1.Codes/Authorizes payment of invoices
2.Responsible for oversight in assigned
budget categories/cost centers
3.Reviews periodic budget reporting and
acts accordingly
acts accordingly
•Finance Staff
1.Enforces & implements all financial internal
controls
2.Directs program & executive management staff in
approved fiscal management procedures
3.Produces reports for staff and board of directors
4.Oversees operation of accounting system including
proper coding of costs & revenues
proper coding of costs & revenues
5.Coordinates Financial and Annual Budget planning
processes
20
1/28/2012
•Reporting –– Why?
•Reporting
1.Forecasting
2.Analysis for changing course
3.Accountability
•Reporting
Reporting Structures
Structures
1.Budget to Actual Reports
2.Dashboard Reports
3.Independent Audits
4.Tax Report
21
1/28/2012
•Budget to Actual Reports
g
p
1.Tracks revenues & expenses and
correlates the data to budget numbers
2.Provides a detailed picture of
organizational and program health
3 Provided to all staff with budget
3.Provided to all staff with budget
responsibility
•Dashboard Reports
•Dashboard Reports
1.“At a Glance” internal reports
2.Includes key metrics in fiscal health of
the organization to assess current fiscal
health
22
1/28/2012
•Independent
Independent Audits
Audits
1.Assesses fiscal position of the
organization
2.Includes “Schedule of Functional
Expenses”
•Tax Report
p
1.Divides expenses into 3 categories:
2.General & Administrative
3.Fundraising
4.Program Activities
23
1/28/2012
•What to do with these reports?
p
1.Meet periodically as a group to review
reports
2.Use reports as a guide to change
organizational goals/behaviors
END OF THE BAGIAN KEDUA
24
1/28/2012
TERIMA KASIH
25
Bagian Kedua
d
NONPROFIT FINANCIAL PLANNING
G usta a f A. Lumiu
Financial Planning for Your Non‐Profit
Introduction “Double Bottom Line”
1
1/28/2012
•Mission Bottom Line
1.Progress of Mission
2.Meeting needs of communities served
•Financial Bottom Line
•Financial Bottom Line
1.Meeting budget targets
2.Secure funding
3.Effective Operational Infrastructure
2
1/28/2012
Why plan?
Long term financial planning gives you a
guide for your organization’s fiscal health.
If an organization is fiscally healthy, it can
bette eet ts p og a
better meet its programmatic goals.
at c goa s
•Fiscal Health
Strategic Business Plan
Budget Integration
3
1/28/2012
Long Term Strategic & Financial Planning
Objectives
1. Importance & Objectives of a long term
financial plan
2. Common Components of a Business Plan
Methodologies & Strategies for creation
Methodologies & Strategies for creation
of long term business plans
1.
• Business Plan
Business Plan
1.Road Map to your organization’s future
2.Financial data integrated with
programmatic data
3.Upfront thinking
4.Growth Goals
h
l
4
1/28/2012
• Importance of a Business Plan
1.Reduce risk in decision making
2.Aid in fundraising efforts
f
ff
3.Aid in allocation of resources
4.Gives your organization a clear financial
direction
5.Sets revenue goals
g
• Components of your Business Plan
1.Goals, Results & Challenges
2.Market Conditions
3.Revenue & Expense Projections
5
1/28/2012
• Goals, Results & Challenges
1.Where does your organization want to be
in 3‐5 years?
2.What are the expected
accomplishments?
3.What are the hurdles to accomplishing
these goals & results?
these goals & results?
•Market Conditions
1.Who are you serving?
2.What portion of the general market are
you trying to reach?
3.Who is doing similar work in your area?
4.Why are you different and/or better?
y
y
/
6
1/28/2012
•Revenue Projections
•Revenue Projections
1.What are your funding sources?
2.Identification of new sources of revenue
3.What resources will you need to
complete your goals?
•Expense Projections
1.What are your staffing & infrastructure
1
Wh t
t ffi & i f t t
needs?
2.What will new programs and objectives
cost?
3.Will there be expansion and what is its
impact?
7
1/28/2012
•Practical Steps
1.Decide time frame covered (3‐5 years)
2.Identify stakeholders
3.Identify person responsible for creation
of the document
4 Create a timeline for completion and
4.Create a timeline for completion and
STICK TO IT
Budgeting
Obj ti
Objectives
1.Importance of Annual Budgeting
2.Potential Structure(s) of Annual Budgets
3.Methodologies for creating an Annual
budget
8
1/28/2012
•Budget ‐ Purpose
1.Annual plan to allocate resources in order to
1
A
l l t ll t
i
d t
meet program objectives
2.Sets balance between revenue and expense
3.Conforms to long term plans
4.Primarily an internal document
•Budget types
1.Capital Budget
2.Operating Budget
3.Program Budgets
9
1/28/2012
•Budget Structure
B d t St t
1.Should conform to existing systems and
objectives
2.Reflect organizational structure
3.Reflect funder sources
•Main Elements
•Main Elements
1.Chart of Accounts
2.Cost Centers/Program Areas
3.Revenue & Cost
10
1/28/2012
•Chart
Chart of Accounts
of Accounts
1.Natural expense structure
2.Reflects Accounting system structure
3.Examples include salaries, fringe
benefits, rent, office supplies,
professional services
f i
l
i
•Cost Centers/Program Areas
1.Budget should be divided according to
1
Budget should be divided according to
organizational structure and activities
2.Program activities divided in a way that
makes sense for your organization
3.Examples: General & Administrative,
F d i i Ed ti P
Fundraising, Education Program,
Community Outreach, etc.
11
1/28/2012
•Revenue & Cost
1.Budget should reflect areas of revenue
& costs associated with each program
activity (if relevant)
•Sub‐Divisions
1.Departmental Budgets
2.Grant Budgets
3.Program Budgets
12
1/28/2012
•Creating your budget
C ti
b d t
1.Create a timeline for completion of
the budget
2.Choose a structural template
3.Identify staff roles & responsibilities
y
p
•Staff Roles
1.Identify one staff member to coordinate the
budget process (finance staff if available)
2.Creation is a group effort – Include Program
staff in process
3.Make program directors responsible for
specific budget areas
4 Organization Head (Executive Director) makes
4.Organization Head (Executive Director) makes
final staff decisions
5.Submit to Board of Directors for final approval
13
1/28/2012
•Goals & Objectives
1.Clearly identify the year
1
Clearly identify the year’ss major goals,
major goals
objectives and activities
2.Identify continuing activities
3.Any new activities?
4.Any activities eliminated
?
•Identify Major Assumptions
y
j
p
1.What overarching assumptions impact
the whole organization of multiple
components/departments?
14
1/28/2012
•Creation
Creation Methodologies
Methodologies
1.Line Item Budgeting
2.Program Budgeting
3.Zero Based Budgeting
4.Grant Budgeting
•Line Item Budgeting
Uses previous year’s data with changes based
on percentage changes for each expense
•Program Budgeting
P
B d ti
Focuses on Program Expenses and Income
Income results
• Zero Based Budgeting
All activities are returned to zero each year and
justifications given for each item each year
• Grant Budgeting
Budgets created for funders with restrictions on ways
funds can be spent
15
1/28/2012
1.Delegation of budget authority to staff
increases ownership of program and financial
activities
2.Make the internal budget as detailed as
possible – write down ALL assumptions
3.Presentation to Board of Directors need not
include every detail
4 Have budget approved 1 2 months before
4.Have budget approved 1‐2 months before
beginning of fiscal year
•Integration of Financial Planning
g
g
Objectives:
1.Integration of Financial Plans into Accounting
& Financial Systems
2.Methodologies of supporting & fostering
budget accountability & reporting
3T i l l
3.Typical roles of management & financial staff
f
& fi
i l ff
in financial planning
16
1/28/2012
•Financial Systems Integration
•Financial Systems Integration
1.Accounting System
2.Financial Processes
•Accounting System/Software
1.Choose an Accounting System that can
integrate all data points needed to track your
budget
2.Enter all budgets into the system – This will
facilitate reporting.
3 Cross check accounting systems with other
3.Cross check accounting systems with other
sources (member/fundraising databases)
17
1/28/2012
•Financial Systems Structure
•Financial Systems Structure
1.Clearly define roles of staff
2.Code all revenues & expenses in a
consistent format with your budget
3.Require consistent coding methods
•Roles
Roles of Staff
of Staff
1.Executive Management
2.Finance Management
3.Program Staff
4.Board of Directors (Finance Committee)
18
1/28/2012
•Executive Management
1.Responsible for overall fiscal health and delivery of
mission
mission
2.Often has check signing authority (final control of
systems)
3.Assigns financial responsibility where appropriate
4.Makes final changes/decisions to submitted staff
budgets
5 Takes action where/when appropriate
5.Takes action where/when appropriate
6.Reports to Board of Directors
7.Understanding & Awareness of Finance is essential
•Board of Directors (Finance
Committee/Treasurer)
1.Responsible for big picture fiscal health
2.Approves budget
3.Reviews oversight reports including
Budget to Actual reports
4 A th i
4.Authorizes amendments to budgets
d
t t b d t
19
1/28/2012
•Program Management Staff
1.Codes/Authorizes payment of invoices
2.Responsible for oversight in assigned
budget categories/cost centers
3.Reviews periodic budget reporting and
acts accordingly
acts accordingly
•Finance Staff
1.Enforces & implements all financial internal
controls
2.Directs program & executive management staff in
approved fiscal management procedures
3.Produces reports for staff and board of directors
4.Oversees operation of accounting system including
proper coding of costs & revenues
proper coding of costs & revenues
5.Coordinates Financial and Annual Budget planning
processes
20
1/28/2012
•Reporting –– Why?
•Reporting
1.Forecasting
2.Analysis for changing course
3.Accountability
•Reporting
Reporting Structures
Structures
1.Budget to Actual Reports
2.Dashboard Reports
3.Independent Audits
4.Tax Report
21
1/28/2012
•Budget to Actual Reports
g
p
1.Tracks revenues & expenses and
correlates the data to budget numbers
2.Provides a detailed picture of
organizational and program health
3 Provided to all staff with budget
3.Provided to all staff with budget
responsibility
•Dashboard Reports
•Dashboard Reports
1.“At a Glance” internal reports
2.Includes key metrics in fiscal health of
the organization to assess current fiscal
health
22
1/28/2012
•Independent
Independent Audits
Audits
1.Assesses fiscal position of the
organization
2.Includes “Schedule of Functional
Expenses”
•Tax Report
p
1.Divides expenses into 3 categories:
2.General & Administrative
3.Fundraising
4.Program Activities
23
1/28/2012
•What to do with these reports?
p
1.Meet periodically as a group to review
reports
2.Use reports as a guide to change
organizational goals/behaviors
END OF THE BAGIAN KEDUA
24
1/28/2012
TERIMA KASIH
25