Financial Planning for Sustainable Nonprofits. Developed by Nonprofits Assistance Fund Presented by Curtis Klotz, CPA

Transcription

1 Financial Planning for Sustainable Nonprofits Developed by Nonprofits Assistance Fund Presented by Curtis Klotz, CPA

2 Who We Are Nonprofits Assistance Fund s mission is to build financially healthy nonprofits that foster community vitality. Our financial experts help nonprofits strengthen their capacity to address unexpected events, finance new opportunities, and realize strategic goals. We fulfill our mission by helping you thrive. Find out more at

3 Goals for Today s Workshop 1. Gain analytical tools to assist in understanding an organization s current financial position and current business model 2. Learn different techniques and approaches to having practical conversations critical to organizational decision-making 3. Explore factors to consider when scenario planning and multi-year budgeting through case examples 3

4 Assessing Your Current Financial Position

5 The Balance Sheet Financial assets and obligations as of a specific date Assets What is owned Liabilities What is owed Net Assets Net Worth, Equity, or Retained Earnings 4, 5, 6

6 The Income Statement Amounts of income and expenses for a certain period of time Resulting Change in Net Assets Surplus (profit) or deficit (loss) Also known as net income 7

7 Assessing Your Current Financial Position 6, 7

8 Assessing Your Current Financial Position 8

9 Assessing Your Current Financial Position 9, 10

10 Understanding Your Business Model

11 The Income Statement Amounts of income and expenses for a certain period of time Resulting Change in Net Assets Surplus (profit) or deficit (loss) Also known as net income 11, 12

12 Understanding Your Business Model 13

13 Understanding Your Business Model 14

14 Trend Analysis

15 Income Statement Trends 15

16 Balance Sheet Trends 16

17 Income Trends

18 Program Financial Results

19 Gauging Risks to Your Income Budget 18

20 Program-Based Reports 19

21 How Flexible Are Your Expenses? 20

22 Strategic Decision-Making Review of analysis Liquidity analysis Balance sheet strength Income risk and reliance Trend analysis Program financial results (Re)iteration of organizational goals and priorities Board and staff leadership revisit goals that have been laid out in strategic plans, work plans, budget What is most important to the organization? How nimble is the organization? 21

23 Mission Impact and Financial Impact

24 Utilize Idea Screens 23

25 Cost-Benefit Analysis 24

26 Understand Your Financial Management Culture What types of languages and attitudes are prevalent when discussing organizational finance? How dynamic is your budget? 25

27 Understand Your Financial Management Culture Professionalization Roles and responsibilities Transparency and communication Risk tolerance 26

28 Scenario Planning

29 Scenario Planning Considerations How will scenarios differ? Consider the entire realistic realm of possibilities, particularly in the income budget Are income sources variable by percentage or all-ornothing? What events would trigger a change in course? How flexible are your expenses? How could they become more flexible? 27

30 Income Scenario 1 28

31 Expense Scenario 1 29

32 Impact Scenario 1 30

33 Income Scenario 2 31

34 Expense Scenario 2 32

35 Impact Scenario 2 33

36 Income Scenario 3 34

37 Expense Scenario 3 35

38 Expense Scenarios Summary 36

39 Planning Summary 37

40 Financial Forecasting

41 Financial Forecasting Purpose of financial forecasting Provide an action plan to achieve strategic goals Translate strategic plans into financial plans Confirm priorities Identify capacity needs Prepare for organizational changes to support goals Create SMART goals to implement financial plan 38

42 Financial Forecasting Financial forecasting steps Use strategic plan to identify financial requirements Prepare simple budget plan for core ongoing activities Estimate costs to achieve strategic goals Identify need for resources to support new costs Ask and consider: What is our optimal income mix? Honestly assess feasibility of financial needs Prioritize and balance Implement and monitor 39

43 Financial Forecasting 40

44 Financial Forecasting 41

45 Financial Forecasting

46 How To Use Today s Workshop 1. Ensure that key organizational decision-makers have a shared understanding of the organization s financial health, business model, and financial risks. 2. Revisit important organizational documents such as strategic plans and work plans. If necessary, revisit conversations to be certain that there is agreement on key organizational goals and priorities. 3. Consider what will be necessary to become a more financially dynamic and flexible organization by reviewing cost structures. Look forward; think about how to properly balance an emphasis on annual budgeting with scenario planning and multi-year financial forecasting. 43