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Charity finance can be a black art but this financial planning template for charities gives you everything you need for the management of your charity finances. There is a simplified financial planning checklist for small charities.
To access help and resources on anything to do with running a charity, including funding, finance, accounting and tax, click the AI Bunny icon in the bottom right of your screen and ask it short questions, including key words.
Income, expenditure, reserves, balance sheet, and cashflow. The basic elements you will need to consider in your financial planning to manage risk and ensure financial sustainability. In the long-term, if your expenditure is greater than your income and you can’t support this from your reserves then you are no longer financially sustainable.
To prevent this, and ensure that you have enough cash to trade, you need to keep on top of the basics. Do you understand these and also your business model – how you generate and spend cash? Do you understand your income streams and services sufficiently to understand which make money and which don’t? You are going to need to know this to make planning decisions about which services and activities to keep going and those potentially to scale back, or stop.
Charity financial management can be broken down in to three main system areas in financial planning to create your sustainability plan; strategic, operational, and cultural.
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A big thank you to Moore Kingston Smith who co-produced this template and checklist with me. You can download it in toolkit form from the system.
| General:
Short-term income heavily impacted. Longer-term income pipeline uncertain and/or substantially impacted. |
| Fundraising: Income from fundraising, events, and regular giving significantly affected. |
| Trusts and Foundations: Income from trusts and foundations at risk, or moving towards those services only focused on Coronavirus. |
| Grants and Contracts:
Income from grants and contracts disrupted, or cancelled. Payment by results not possible. Grants not paid on time (affecting cashflow). Funding bid decisions delayed, or core grants potentially at risk. |
| Loss-making grants or contracts: Subsidising large contracts and grants from unrestricted reserves. |
| Multi-year funding: These end with no replacement secured yet. |
| Investments: Income from investments significantly delayed or reduced. |
| Trading: Income from shops, and other trading significantly impacted (there is also a potential cashflow impact here). |
| Diversification: Income not diversified adequately - single/limited income streams. |
| Fluctuation: Increased/decreased costs due to disruption of charity activities, non-delivery by contractors, changes in delivery of services, or changes in service demand.
Specifically consider the impact on the main areas of your work, typically: - Staff costs (including furloughing) - Non-staff costs Specific large contracts with suppliers or sub-contractors |
| Fixed Costs: High levels of fixed costs (don’t vary – eg rent) compared to variable costs (vary with level of activity). Limited ability to be flexible in making changes to your cost base. |
| Cost Reduction: Has the charity considered how best to hold back on costs, through cost reduction, stopping services or furloughing? Or using free goods and services available to charities? |
Unrestricted cash reserves well below target to support additional losses, invest in the business, or provide cashflow.
Limited free reserves (freely available and liquid cash reserves).
Cash: Limited cash at bank, or financial assets that could be easily liquidated into cash, to pay bills, wages, and other costs.
| General: After mapping out all major cash needs (Salaries, critical supplier payments, HMRC), cash is insufficient to keep the business solvent. |
| Business Cycle: When looking at your business cycle you are not aware of when cash peaks and troughs. |
| Overdraft: Bank unlikely to agree overdraft, or loan, and/or no assets to secure loans against. |
| This is where we look at the mechanics of finance: financial governance, transaction processing, controls, management information and sign off on bids, costing and cost recovery. Each element of the finance function is critical to protecting the assets of the organisation, and reporting on this quickly and in a good enough format to make management decisions. |
| Reports: Trustees and management not sure of current financial position, including current cash position. |
| Budget Control: Lack of effective budget control. |
| Forecasts: Trustees and management not aware of future year finance estimates, coronavirus impact not reflected in these. |
| Business Planning: Robust plans to replace lost income, or hold back on expenditure not yet in place. No contingency plans or scenarios modelled. |
| Financial Plan: Is not sufficient. |
| Reserves: Management of reserves is insufficient. Unplanned spending of free reserves. |
| Reserves: Spending restricted money on non-restricted purposes; including bank-rolling activities and cashflow from restricted sources. |
| Timely: Management information not produced on a timely basis to provide relevant and current information. |
| Up-to-date: Income and expense forecasts not up-to-date and/or prudent. |
| Collaborative: Management information is not produced using financial and non-financial information that really matters; it is generic data and not owned by budget holders. |
Security: Insufficient controls in place to ensure security of cash and where this is paid to (there are growing fraud attempts in the Coronavirus environment).
Going Round Processes: Staff are no longer adhering to process and procedure and are going round these.
Sign off: Effective sign off of paperwork has broken down or is insufficient (this usually occurs because sign off is paper-based and staff are no longer in the same physical location).
Input Errors: Inefficient and outdated finance systems meaning duplication of data entry and increased input errors.
Processing Delays: Significant delays in processing now occurring due to Coronavirus and poor systems.
Visibility: Trustees and management not aware of what each service truly costs to run, including a fair share of overheads.
Subsidising Grants and Contracts: Unrestricted funding being used to subsidise overheads and grants and contracts without effective sign off.
| This is often forgotten about, but looks at whether people think that finance is important or whether finance lacks teeth to get budget-holders to take action. It also focuses on finance’s role as a business partner, to help the charity think in difficult times, and not just act as a processing function. |
Decisions: Finance are not part of the senior leadership team or involved in any key decision making. Alternatively, finance sees their role as transaction processing, not helping the charity respond.
Management Information: Management information is produced by finance alone and without input from budget holders and other staff
Value: Non-finance staff don’t see the value in finance
Accountability: Finance are not given authority to hold your charity's budget and forecast holders to account for variances
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