There is an old hassidic expression, that man makes plans, and god and nature run their own course. We have all planned with the best intentions, only to be confounded along the way by unforeseen events. Sometimes they add value to the scenario we are creating, other times they seek to defeat us.
That our plans come adrift doesn't mean that we should therefore abandon the effort. We need to double-down and get it right. Planning for the financial future of a nonprofit is a serious and critical responsiblity. Boards have as their first responsiblity to see that planning is in place, and this starts with the annual, three year and five year budgets.
Planning is the bedrock of certainty, and certainty is what staff, supporters and consumers are seeking from their nonprofit organisation. Reassurance about the future of the organisation and how it will roll, means that the right number and kind of staff can be recruited in a timely way; staff and volunteers can be brought on or let go in a calm and unsurprising atmosphere. Reducing the surprises means reducing the stress which staff can feel when they don't know if their jobs will continue or if their clients will continue to be served.
Certainty also means that the risk to assured cashflow is not threatened; the hills and troughs are planned for, thereby reducing the risk of the organisation being blind-sided by insolvency, or having to raise funds quickly to meet 'unforeseen' debts.
To plan well for the future assumes an undetstanding of the current situation, and a good grasp of the history. The data from current and past practice is the basis for the planning exervise. What do we actaully know compared to what we recall, believe, reminisce about. We need data, data, data.
Once we have a basis for planning, we can then try and 'predict the future' through a refining process. First we start juggling the numbers with the big balls! What do we know about the significant funding streams? Is government or philanthropic funding assured? How much and for how long? Can we make prorgram and employment decisions on these big tickets?
It's important to ask the Board to nominate the degree of risk it is prepared to accept in the budget. If funding isn't 100% assured, would it still commit to a program at 80%? What about 40%? What are the decisions that need to be made and at what point should they be made during the financial year? The timing of decisions by the board will be critical, so procrastination is unhelpful.
Doing nothing means that the project may commence late and precious time in implementation is lost, and funds may need to be returned at the end of the year. Going out to early on certain decisions may risk the organisation's reserves if the funding doesn't come through.
Once we have sorted the 'big picture' what are the smaller balls we need to juggle? What are the next ticket items? Can we make decisions about travel, computer acquisitions, resources for programs? At this point we can introduce program level income and expenditure planning. We need to involve those who have the greatest impact on revenue and expenses. Can the bus driver input on the travel budget? Do the staff know the risks involved in making the wrong decisions in the budget? Do they understand the impact - not only on their own program - but other programs which might be affected by unplanned blowouts in their expenses?
Other advice includes:
Schedule the rollout of programs based on an approval timetable, and then nudge the timeframe along if decsions lag (Smartsheet or other project planners are critical here if applied diligently.
Make sure all available technology is applied to the extraction of data. Can rolling cashflow forecasts be implemented from the current accounting platform. Use reporting tools connected to the accounting platform, and then leverage these with advice or guidance to add insights. Calxa, Spotlight, Fathom and similar reporting applications integrate simply with accounting platforms like Xero, MYOB and Quicken... Pick one, learn how to use it, and then report, report, report.
Rely on input from various team members, not just the finance department. The staff have the greatest impact on saving and spending money. Their involvement in the budgeting and planning decision-making engages them in the guidance of how programs are run. They are part of the solution, not the problem around budget over-runs. Of course they need to be able to see the P&Ls for their project, and they need training in how to read these reports, otherwise its a setup for failure.
While planning is an inexact science, without guaranteed outcomes - like life, its better than the alternative.