Financial Management and your group
In a not-for-profit organisation the Board or Committee of Management
is ultimately responsible for finances, though it may sometimes delegate
some responsibility to a funding or finance committee. Through
careful analysis and planning, good financial management should result
in secure funding and the best possible use of available funds.
To manage your finances efficiently you need to:
- Determine your resources
- Cost your needs
- Set a budget and allocate funds to programs and /initiatives to
support the organisation's mission
- Administer the organisation's finances
- Monitor and report progress against your budget
Administer the finances
Within the Board it is the Treasurer's duty to administer funds. The
Treasurer's responsibilities include:
In small community and non-profit groups, the treasurer has little
professional support and fulfills most of the jobs listed above. The
position is usually a volunteer one, so it is a labour of love. The
treasurer should have a good working knowledge of managing finances and
realise that the position may require a lot of time and dedication.
- Maintaining financial records
- Organising bank accounts
- Accounting for all money received
- Accounting for all money spent
- Adhering to the organisation's terms and conditions of business
(payment of bills, contractual arrangements)
- Banking money
- Signing off on outgoing expenses
- Preparing monthly/annual financial statements
- Preparing books for audit
- Drawing up the budget for board
In larger organisations where professionals are employed, the treasurer
is normally supported by office staff and perhaps a a finance committee,
so duties are shared. If duties are not shared the opportunity to seek
external help either through a bookkeeper or accountant or through
assistance internally should be investigated. It is important to ensure
that the Treasurer is not overburdened, as burnout can occur and lead to
The Treasurer also prepares financial reports to assist with board
reporting, future planning and performance monitoring. Treasurers
should, where appropriate, keep up to date with relevant taxation
legislation and legal requirements and ensure that they comply.
In order to plan a year of programs or events and to set goals, an
organisation needs to know if its plans can be funded. Knowing how much
money is available and allocating it accordingly gives an organisation a
clear picture of where it sits financially at any given stage.
There is no point planning a new initiative if there is no money
available to fund the exercise. Forward budgets stop organisations from
falling unnecessarily into debt. Organisations that continue to
overspend will eventually fold, so sensible budgets are essential for
Budgets generally coincide with financial years, and so usually
commence on July 1. Planning for a budget starts earlier - how early
depends on the size of your group, the amount of money you turn over
each year, and the amount of time generally taken to prepare the budget.
You should aim for the Board to sign off on the final budget by June at
the latest, so all changes can be implemented for a July start.
Budgets cover two main items areas: Expenditure and Income.
Expenditure might include:
Income might include:
- Bills - electricity, rates, telephone
Obviously the bigger the organisation, the more line items will be
attached to each of these areas.
- Sales of goods and/or services
- Annual fundraising events
When setting the new year's budget it is important to analyse the
previous year's budget, but don't base your figures purely on that - use
past experience as a guide and then anticipate spending according to the
organisation's 12-month business plan. Take into account any expected
cost increases that may occur (e.g. wages, electricity etc). One simple
method of doing this is to apply an escalation factor to a previous
year's results. But if you can insert preciuse figures then do so.
Preparing a budget involves making educated guesses on what costs and
income will be. It is always best to be conservative when
estimating your income and realistic when estimating your expenditure.
If you over-estimate your revenue and take on programs or staff in the
anticipation of this increased revenue, then danger may be just around
the corner. Extra funds are a bonus, too little could spell disaster.
It is also important to monitor your budget to keep on track. A
comparison between budgeted expenditutre and actual expenditure should
be completed each month and discussed at board meetings.
Plan for the future
While a budget serves a short-term (12 month) function, financial
planning allows organisations to plan for the future, anticipating
spending and income for the next 3-5 years.
To plan for the future an organisation needs to:
- Develop contingency plans (for example, anticipate any funding
sources that may dry up, and identify other sources of potential funds)
- Plan for future events and programs and determine how much money
will be needed to support them
- Set financial goals - profit margins or reinvestment strategies
- Analyse your services or your cause and identify relevant
When managing your finances you should always be on the lookout for
methods in which you can better utilise your precious resources. Here
are some areas to consider:
- Reduce bank fees. You can do this by making fewer transactions
and running accounts that suit your organisation's needs, consolidate
your accounts into one if you have more than one.
- Manage time (a valuable resource). Consider Internet banking.
- Utilise the expertise of members before seeking
- Source the best insurance package to suit your organisation. Why
pay for extras that are not applicable to your group's activities? Seek
Reporting and Audits
Robust reporting of your finances and having your books audited by an
independent auditor will ensure you stay on track. Clear and legible
books enable an organisation to readily access information and provide
accurate accounts to potential sponsors, grant making bodies, the tax
Remember you have a legal responsibility to abide by tax and insurance
laws as well as minimum wage laws and employment laws. Don't cut corners
to reduce your expenditure and certainly don't cut costs at the expense
of the law.
Good financial management allows an organisation to operate efficiently
and plan for the future.