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Financial Management

Financial Management. Key Factors in operating your business Mike Lewis, BBBSA V.P. of Finance & Operations. Financial Management Best Practices. 1. Invest in Infrastructure, especially Fund Development 2. Diversify funding sources 3. Develop unrestricted funding sources

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Financial Management

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  1. Financial Management Key Factors in operating your business Mike Lewis, BBBSA V.P. of Finance & Operations

  2. Financial Management Best Practices 1. Invest in Infrastructure, especially Fund Development 2. Diversify funding sources 3. Develop unrestricted funding sources 4. Board leadership in Fund Development 5. Hire (or contract) a top notch Financial Professional 6. Budget annual surpluses, until reserves are adequate 7. During downturn, take corrective action quickly 8. Focus 9. Have a contingency plan such as a Line of Credit 10.Partner – share resources with other agencies

  3. Invest for Long Term Growth Partial list… • Leadership, e.g. CEO/ED • Fund Development Function • Service Delivery Technology and Processes (AIM, ISDS) • What else? Functional Expense Allocation Issue

  4. How? By Generating Unrestricted Revenue Pursue diverse, unrestricted, recurring dollars • Individual Contributions • Events • Corporate Partnerships • Other? • BBBSA Approach

  5. Skilled Financial Staff • Small Agency • Part-time resource, with B.S. in accounting; • or a contractor; • or share resource(s) • Medium Size Agency • Full-time Director of Finance, or Accounting Manager; BS in accounting Staff proactively.

  6. Financial Health Budget a cash-basis surplus for each year, until the following are achieved: Unrestricted cash is > 25% of annual spending Cash + investments + receivables > 3 x current liabilities

  7. Suggested Budget Process Revenue Budget: • Identify probable revenue sources • Budget revenue conservatively • Diversify Expense Budget: • Budget expenses based on the conservative revenue budget • Invest in capacity to grow • Have a contingency plan

  8. Financial Downturns Happen Before it happens: • Monitor Monthly Cash Flow Statements Carefully • Obtain a Line of Credit – when you don’t need it • Build fund development capabilities • Build cash reserves • When a downturn occurs • Immediately discuss with Board • Reduce expenses = staff costs

  9. Financial Management Infrastructure and Process • Financial Software • Quickbooks, Kintera? • Policies and Procedures • Financial Management Toolkit • Monthly Reporting • Audit

  10. Financial Process: Monthly Reporting • Balance Sheet (Statement of Position) • Statement of revenue and expenses (actual vs. budget) • 12 month cash flow forecast • Summarized Reports for the board

  11. Financial Process: Annual Audit • Must have an audit (Requirement of Affiliation) • Unqualified or “clean” opinion • Review effectiveness of auditors annually, change periodically • Ask auditors for suggestions on improvement in internal controls • Obtain appropriate board approvals

  12. What role do you think the CEO/ED should play?

  13. CEO Role: Strong Financial Leadership • Cultivate financial leadership in both staff and Board • Ensure accountability transparency, and effectiveness of internal controls • Sustain financial health • Make investment decisions (w/Board) • Address issues immediately • Guide the preparation of the annual budget

  14. What roles do the others play?

  15. Role of the Full Board/ Executive Committee • Fiduciary Responsibility • Hold CEO Accountable • Approve Budget • Approve Audit report • Critique Periodic Financial Statements • Implement Finance/Audit Committees, and assess effectiveness

  16. Precursors to Financial Distress • Leadership void (CEO/ED, FD Head) • Absent or under-qualified finance staff • Inconsistent, inaccurate, or difficult to prepare monthly financial statements • Inadequate strategy to replace one or more large non-recurring revenue sources • Rapid growth in matches without adequate investment in Fund Development resources to generate commensurate recurring revenue growth • Recurring Deficits and “cash crunches” • Rising accounts payables and other liabilities; bills unpaid after 45 days • Late, difficult, or “qualified” audits • Others?

  17. Additional Resources • Financial Management Toolkit – Coming December 2006

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