En Ensuring suring the mi mix fit its s you our r go - - PowerPoint PPT Presentation

What at fin inan ancial cial repo eports ts doe

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d need: eed: En Ensuring suring the mi mix fit its s you

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r go governance ernance need eds

A Conver ersation ation with h Hilda lda Pola lanco, nco, Fisc scal al Mana nagem emen ent t Assoc

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iates es and Ruth h McCambridge mbridge, , th the No Nonpr prof

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it Quarterly erly

Sponsor sored ed by:

Tweet t us! #Hild ildaOnFin aOnFinanc ance

3

Finan nancial cial Healt lth and nd Strat trateg egy

1. Set annual and long term financial goals and plans:

• Understand the full costs of programming
• Plan for cash and capital needs
• Establish operating reserves and policies on their use
• Incorporate scenario planning
• Develop three-year financial plans

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Finan nancial cial Healt lth and nd Strat trateg egy y (continu ntinued) d)

2. Establish mechanisms for monitoring financial performance:

• Set Key Performance Indicators
• Develop performance dashboards
• Incorporate forecasting

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Str Strateg egic ic Financial ancial Go Goals ls Revenue enue Conc ncentra entration tion and nd Pre redictability dictability Expense nse Str Structure ture Pro rogram gram Deliv iver ery Model el

Financi ncial Monit itoring ring Plan 1.

• 1. Project Cash

sh Flow to predict shortages 2.

• 2. Observe trends the balance

nce of re receiv ivable bles s vs. . cash 3.

• 3. Track the available “cushion,” aka operati

ting ng reserves es 4.

• 4. Monitor the Operating

rating Surplus s (Defici icit) t) 5.

• 5. Keep an eye on Reven

enue ue Mix and Concen ncentration tration

• 6. Calculate Operating

rating Results ults of key Progra rams ms to ensure full costs are covered Organization A’s mission is to increase its participants’ academic performance and persist isten ence.

• ce. Progra

rams ms include ude after er-school school enri richment hment and academi demic c suppo port.

• t. Three govern

ernment ment fundin ing g sources ces make e up the bulk k of revenue nue and the

• rganizat

nization

• n often

en experi eriences ences cash h shorta tages ges.

Organization B’s mission is to make theater accessible to a broad audience. Progra rams ms include ude performance

• rmances

s and class sses.

• es. Reven

enue e sources ces are re diver erse, se, but multi ti-yea ear fundin ing g and operati ting ng reserves es are dwindl dlin ing g and the organizat nization

• n is

consid sidering ering increa easi sing ng fundrai aisi sing ng and/or

• r ticket

t prices es as we well as cost st reducti ctions.

• ns.

Financi ncial Monit itoring ring Plan 1.

• 1. Observe trends in Un

Unrestr strict icted d and Tempor

• rarily

arily Restr strict cted ed Net et Asset t balan ances ces 2.

• 2. Track the available “cushion,” aka opera

rati ting ng re reserves es 3.

• 3. Monitor the Operat

ating ng Surplus s (Defici icit) t) 4.

• 4. Track Reven

enue ue Mix to determine which streams have declined most significantly

• 5. Analyze Ticket Sale and Class

ss Registrati istration

• n trends

ds alongside Revenue 6.

• 6. Analyze major Expen

ense se Dri river er tre rends s for cost reduction opportunities

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Program m Manager gers Executi cutive e Direct ctor Board of Direct ctors

• Budget-to-actual

revenue & expenses for the program(s) and grants/contracts they oversee

• Balance Sheet (and

supporting schedules)

• Budget-to-actual revenue

& expenses

• for each program
• organization-wide
• Year-end projection(s)
• Cash flow projection
• Management narrative
• Balance sheet (and

supporting schedules)

• Budget-to-actual revenue

& expenses

• for each program
• organization-wide
• Year-end projections
• Cash flow projection
• Performance dashboard

Management Narrative

Balance Sheet

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Liquid uid Unrestr Unrestrict icted ed Net Net Assets ts (LUN UNA) A)

LUNA NA = Un Unres restr trict icted ed Net et Assets s – (Fixed d Assets ets – Mortga tgage ges) s)

• Represents the portion of an organization’s unrestricted net assets that

could be converted to cash relatively easily

• Measure of funds available for purposes such as supplying working

capital, guarding against downturns, and pursuing new opportunities

Benchmar chmark: k: LUNA sufficient to cover 3-6 months of operating expenses is generally considered healthy, but this depends on an organization’s business model, plans and goals.

Balance Sheet: Supporting Schedule

Balance Sheet: Supporting Schedule

Budget-to-Actual Revenue & Expense

Year-end Projection

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Cash Flow Projection

Cash Flow Projection

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A Performance rmance Dashboar ard d compleme ment nts your r oth

• ther financial

ancial reports s witho hout ut replacing acing them

Performance

• rmance Dashb

hboar

• ard

Cash Flow Projections Year-end Projections Budget vs. Actuals Balance Sheet Management Narrative

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To e effectiv tively ely commun unicat icate stra rategic gic-level, l, action

• nab

able re results, ts, a Dashboar ard d must: t:

• Be presented in a us

user-fr frien iendly dly visua ual l forma rmat t

• Repres

resent nt a manag agea eable ble set set of Key Performa

• rmance

nce Indi dicat cator

• rs

s (KPIs) that:

– Are easily quantified – Can be measured based on available, high quality data – Drive your business model

• Clearly show perform
• rmanc

nce agains nst t a define ned d target t

• Support risk-management by highli

hligh ghtin ting g out ut-of

• f-th

the-or

• rdina

dinary results ts

The Goal is to suppo port t decisio sion-maki making ng and facil ilitat itate communi unicati ation

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Financi ncial al Health th Fundraisi raising ng & De Developme pment nt Programs ams & Service ce De Delivery Human n Capit ital al Mark rket etin ing g & Communic nicatio ations ns Ou Outreach ch & Advocac acy Informati rmation

• n

Technolo

• logy

gy Risk Manage geme ment nt & Governan ance ce Facili lities ties & Capit ital al Projects cts KPIs can be defined ned across s all areas s of your organiza nizatio tion

QUESTIONS?

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Stron

• ngNon

gNonpr prof

• fits.or

its.org

In collaboration with the Wallace Foundation, FMA has created a library of tools and resources to help organizations become “fiscally fit” Four r Topic c Ar Areas: : Plann nning ing | Moni nitoring

• ring | Op

Oper erat ations ions | Governance ernance

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Onl nline ine Tut utorials

• rials for StrongNon
• ngNonprof
• fits.or

its.org

FMA offers complimentary orientation one-hour webinars that feature an

• verview of the website and drill down on several of its key resources

Upcoming webinar dates:

• December

cember 1 at 2:00pm 00pm

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