Professional Documents
Culture Documents
By
Mark E Freeman
Contents
Breaking it down
Tools
Failure
Summary
Strategic Financial Management
Backward looking
• Verifiable
• Realised
• Tangible
Forward looking
• Judgmental
• Potential
• Intangible
Inward looking
• Objective
• Costs
• Capital maintenance
Outward looking
• Subjective
• Values
• Adequate return
Management Cont’d
Static
• Discrete
• Short-term
• Profits/Assets
Dynamic
• Continuum
• Long-term
• Cash flow
Breaking the Strategy Down
1. Immediate needs
Cash
Realism
Expertise
Tools of The Trade
Business/
corporate
plan
KPIs Budgets
Financial M’ment
TOOLS
Statements Reports
Cash Project
Flows Budgets
Forecasts
Business Plan
Understand the major costs of the charity including salaries and process of
increases, recruitment and related staff costs;
For one-off expenditure understanding how to best ring fence them and how
they will be cut at the end of the project;
Understand where you are making an investment and how this is going to be
funded; and
Reserves policies
The Current State of Affairs
The reserves policy should align with your overall strategy otherwise how
will you know what reserves you require?
70% of charities with income greater than £10,000 do not have a reserves
policy!
Media criticism – due to not understanding why reserves are held in the
first place or the rational behind holding reserves
What are Reserves?
“The resources the charity has or can make available to spend for
any or all of the charity’s purposes once it has met its
commitments and covered all its other planned expenditure”
(SORP 2000)
The live line in the event that everything goes the wrong way!
Closure to enable the charity to meet its obligations (e.g. paying its
creditors) in the event of winding up the charity
Budgeted change to provide cover beyond the minimum level to cope with
expected changes in activity levels and/or timing differences
Special projects to provide additional finance which enables the charity to fund
special projects on an ad hoc basis
The level/ range of reserves that the Trustees believe the charity needs
What steps the charity is going to take to establish/ maintain the level
Review the balance sheet to ensure that all endowment and restricted
funds have been identified
Ensure that all designated funds can be justified and there are no further
ones
Type of expenditure
How far does this expenditure go towards reaching the charity’s objectives?
Use Key Performance Indicators to monitor and gauge success and failure;
• Targets
• Aligned with mission/goals
Simple and precise reporting;
Focus on what has happened and how to change or utilise the results;
Communicate changes needed to achieve original plan; and
Identify risks and ways these can be addressed.
What do you need to present?
• Income levels
• Main expenses
• Cash flow
• Surpluses or deficits
• Targets for this and coming years
• Corporate plan information
Funding levels
Is your income
• Short term
• Long term
• Fixed term
• Outcome dependent?
• Dependent on reports to funders?
Key costs
No mission/corporate statement –
agreed in terms of identifiable
deliverables
No understanding the current
position and what is really
achievable from it
Timetable to short to develop
plans
Under investment in future
resources or requirements to
achieve the plan
Reporting to complex and not
understood easy
Failure to understand what is
required to achieve the plan by
management and trustees
Simple is Best
• Turnover is vanity,
1+1=2
• Profit (surplus) is sanity,
Email: mark.freeman@charitybusiness.com