Financial Management

Introduction

Financial management systems will become more and more robust as you grow. This project gives you an overview of those systems and how you can start thinking about your needs in financial management.

Why

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This toolkit is useful when:

• Organisation needs to manage finances in an efficient yet transparent manner.
• Organisation needs to handle financial documents such as budgets, income and expenditure statements etc. in a professional manner.

What you can expect

This is a step by step guide to Financial Management. Financial Management includes recording all financial transactions, monitoring and controlling incomes and expenditures, satisfying legal requirements and timely and accurate reporting to donors and others. It requires analyzing financial performance, identifying ways to use resources efficiently, and finding creative means to use resources in order to generate additional resources.

Step 1: Establish Need

• Before you start working on financial management, fully understand all its components: Budgeting, cash flow, services, monitoring, financial controls and financial reporting. This toolkit will certainly help you with that!
• To set up or improve these systems requires open access to all financial information in a transparent manner. Work closely with all staff involved to facilitate this.

Watch this great learning session of Global Giving on Nonprofit Finance Fundamentals:

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Step 2: Assign Responsibility

• Clearly understand everyone who is currently handling the finances. In a small organisation it can be only the leader; in a larger setting there may be a finance and admin team.
• If there is lack of clarity about who is handling the finances, or if leader is not able to manage it alone, it will help to employ a finance manager.

Step 3: Material Collection

• Work with leadership or finance person to get access to current financial documents, reports etc. and understand all practices, even if they are very basic.
• It is important to understand their current way of handling finances, in order to build on that.
• Collate and study all material, analyse the systems and processes and identify strengths and weaknesses.

This video from the University of Ghana will help you with reading income and expense statements, and identifying financial strengths and weaknesses:
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Step 4: Assessment

Work with everyone who handles finances to further assess how financial management is handled and perceived, for example:

• Do you have a financial system that provides adequate information about your incomes and expenditures?
• Are you collecting data you truly need or is it excessive?
• Are your financial reports accurate, clear, complete and timely?
• Do you have an integrated organizational budget?
• Etc.

[downloadbutton type="pdf" size="" url="https://www.changethegameacademy.org/wp-content/uploads/2015/11/Risk-Assessment-Questionnaire.pdf"]Risk assessment questionnaire[/downloadbutton]

Step 5: Evaluation

• After studying existing documents and conducting interviews or discussions, catalogue what works and what does not.
• Review whatever information you have collected very carefully and identify gaps or bottlenecks.
• A SWOT can be helpful to analyze the current financial management.
• Write an evaluation report which is shared with leadership and finance staff.
• Suggest improvements to strengthen current systems and processes.

Step 6: Training

• Improve the weak systems and processes.
• Once you have sound financial practices in place, it is important to share your knowledge and train the staff.
• Everyone needs to contribute to ensure transparent and efficient financial practices.

Key To Success

• One person should never be responsible for all aspects of a financial transaction, division of duties is key.
• Every single staff member should understand an organisation’s internal controls, policies, and procedures.
• Think creatively about how to do more with less!
• Avoid dependency on a single donor or funding source.
• Generating income is a bonus and makes your financial management more stable. It is an important step towards sustainability.

Challenges

• Sources of income may be inconsistent.
• Donations are often restricted funds.