by Guest contributor | Sep 19, 2022 | Article
Unlike for-profit businesses which are understandably focused on profit and revenue, nonprofits have a different goal: sustainability.
A well-considered financial plan focuses on the mission at hand, while needing to meet the objectives and needs of its grantmaking organisation. When it comes to funding positive change across the globe, there is much to consider.
With a noble mission and the need to be good stewards of financial resources, grantmaking organisations, like any other business, need effective financial plans to ensure proper disbursement of funds and overall financial sustainability.
Before diving into the steps of creating a financial plan for your grantmaking organisation, it is good to cover the basics of why it’s important to create a financial plan. So, why take time to build a financial plan for grantmaking? Here are some compelling reasons to do so.
A company’s financial future can be anticipated through financial forecasting by looking at data on past performance, such as revenue, cash flow, expense or sales. Since there are so many unforeseeable factors that can affect business performance, this involves speculation and assumptions. When you come up with a financial sustainability plan for your organisation, you need to have a sound forecast.
When you create your own financial plan for your grantmaking organisation, it will help you foresee and prepare for situations you did not expect. Better forecasting minimises unnecessary expenses and optimises your financial resources.
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Grantmaking organisations are considered high-trust organisations, which means integrity is critically important because funding is often coming from generous donors who are meticulous about where their money goes.
As you maintain a financial plan, it will help you foster your relationship with the donors because through it, you can show where every dollar goes.
One of the reasons why supporters or donors give their finances to an institution or grantmaking organisation is impeccable credibility. If you have undeniable credibility, you can win and deepen the trust of your supporters. And one of the most effective ways to build credibility is to create a financial plan.
Having a financial plan communicates seriousness and credibility to your supporters. And when you win the trust of your supporters, they will wholeheartedly give to your cause without doubts or hesitation.
Grantmaking organisations tend to partner or collaborate with other non-profit organisations.This is because they have similar goals and missions. They do this to give the highest possible support to any deserving groups or individuals.
But of course, just like any supporter or donor, nonprofits are attracted to organisations who can show a high level of integrity, credibility and financial transparency.
You can find numerous grantmaking best practices online that will benefit your organisation. And, creating and establishing a solid financial plan is one the most important aspects of managing a successful grantmaking organisation.
Here are five best prazctices to consider when creating a financial plan for your grantmaking organisation:
Up to 55% of nonprofits don’t report their expenses. While size might be an issue, the downside to not tracking and reporting expenses is not having the ability to budget based on past performance. Creating a budget helps you determine the financial goals for nonprofit organisations.
Instead of basing it on the current condition of your financial resources or projected expenses, it is wiser to base it on your past performance because this gives you a much clearer and more realistic estimate about the actual expenses of your organisation.
You can see your organisation’s cash flow by looking at its financial records. Your records should include balance sheets, income statements, cash flow statements and statements of shareholders’ equity.
Keeping a detailed record of your organisation’s finances can seem like a tedious task but it is essential in creating an effective financial plan that will help you run and manage your organisation. Find a bookkeeping software to help you effectively track expenses and fundraising output through time. From there, you will be able to easily create your budget and establish a financial sustainability plan. You can check out this list of the best bookkeeping software to find a product that will work for you.
Using grant management software helps you manage your grant or funding program more effectively through your entire grant lifecycle.
Good Grants, for example, empowers grantmakers to manage the entire grant lifecycle, streamline processes and optimise funding, from wherever you are, online.
Grantmakers receive access to time-saving application management functionality, including the ability to automatically screen for eligibility, powerful grant review tools to make good decisions and a growing suite of post-award grant management functionality to help everyone stay on track, manage performance and minimise risk.
This goes hand-in-hand in building credibility with creating a financial plan for your grantmaking organisation.
Be sure your grantmaking software can integrate easily with your bookkeeping application to help you streamline the financial management of your organisation and funding.
It’s not a fun thing to think about—but it’s important to consider and plan for any possible unpleasant financial scenarios to ensure your organisation’s sustainability. Consider how you can prevent the loss of any financial assets and reduce the potential for any impact on those losses to your grantees or stakeholders.
This could include fraud, mismanagement of funds (by someone in your organisation or a possible grantee) or loss of physical assets such as theft of property.
You can plan for these financial risks by creating a risk management grid, where you map out the likelihood of potential risks and the potential financial impact those risks would have.
Keep your team and stakeholders informed about any risk management procedures, including any liability insurance you have to help cover in case of any issues that arise.
Creating a sound financial plan requires your team to come together and go over all aspects of your organisation. You should typically begin planning your budget or financial plan three months before the end of the fiscal year so you can share it as relevant with your stakeholders.
This could include gaining approval from your board, or auditing your funding opportunities to see how your funds were spent, and what will be needed the following year to maximise the impact.
For example, you might want to verify that your plan meets program and operational goals. Or you might need to review assumptions with your accounting or finance team. Be sure to make adjustments, based on goals and capacity to align with your budget.
With so many different people typically involved in a project or funding opportunity, it’s important to plan accordingly and with due diligence.
Having a clearly laid-out financial plan for your grantmaking initiatives will build trust in your program and organisation, build credibility with your stakeholders and partners and drive sustainability for your mission and program at large.
With so much at stake in powering positive change around the world, it’s mission critical to outline your financial plan to ensure and drive your funding support.
This post was provided by FinancesOnline, a platform for SaaS software and financial products reviews and reports. Learn more.
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