Session 3: Financial Monitoring

Transcription

1 Session 3: Financial Monitoring Financial Management Training Program Hilda Polanco, CPA, CCSA, CGMA, Founder and CEO Gretchen Upholt, MPA, Consultant November 3, 2016 Reflections on Session 2 2 1

2 As a result of participation, organizations can expect: Enhanced ability to communicate your organization s financial story to staff, board, funders, and other key stakeholders Increased ability to use historical financial information to inform the organization s future plans and forecasts in an inclusive, team-based process More effective communication and financial decision-making among members of the leadership team A foundation for building an organization-wide culture of operational excellence Identification of areas with opportunities for improvement and action steps on how to move forward 3 2

3 What are some elements of success in financial monitoring? 5 Welcome & Overview (9:00am) A Cross-Functional Partnership Shared Financial Management Financial Reports Lunch (12:00pm) Dashboards Adjourn (3:00pm) 6 3

4 A CROSS-FUNCTIONAL PARTNERSHIP Cross Functional Communication Finance Staff: What do non Finance staff do (or not do) that creates challenges for your team? Program Staff: What do Finance staff do (or not do) that creates challenges for you team? Development Staff: What do Finance staff do (or not do) that creates Executive Directors: What do functional leaders do (or not do) that creates challenges for your team? challenges for executive staff and team communication? All: What are the barriers to successful communication? 8 4

5 Development Plans for and classifies contributions Sets the financial strategy and direction for the organization in collaboration with the Board Executive Team Finance Program Provides relevant, timely, and accurate financial data to facilitate decision-making 9 Clarifies services and programming and what drives expenses SHARED FINANCIAL MANAGEMENT 5

6 Shared Finance Department Heads Authorization for purchases Recording & allocating expenses to the correct accounts & programs Reporting accurate, timely data needed for decision making Monitoring variances and developing action plans for course correction Documentation of spending Development / Finance Reconciliation: Group Question How often does the development department meet with the finance department to reconcile donations? a) Daily b) Weekly c) Monthly d) Quarterly e) Annually 12 6

7 Development / Finance Reconciliation Should happen on a monthly basis Must be completed before Finance can close the books and issue interim financial reports Codes in the Development and Accounting databases need to match 13 Sample Critical Dates Target Date By last business day of the month: By 2 nd business day following month-end: By 8 th business day following month-end: By 10 th business day following month-end: Task Submission of Invoices and Employee Expense Reports to Accounts Payable Submission of Final Monthly Adjustments Month-end Closing Circulation of Budget to Actual Reports 14 7

8 Possible Bottlenecks in the Monthly Close Process Time lag in receiving invoices, expense reports, and other documentation from staff Determining amounts to voucher on government contracts Amount of Excel manipulation or manual input of journal entries 15 Questions

9 FINANCIAL REPORTS Financial Reports Should: Address needs of senior management, board, and department /program managers Be formatted in a user-friendly way Be reviewed and discussed regularly Be used to inform decision-making 18 9

10 Who should receive financial reports and when? Monthly Quarterly Department Managers Executive Leadership Board of Directors Budget-to-Actual Revenue Performance Dashboard Management Narrative & Expenses for the program(s) and Budget-to-Actual Revenue Performance Dashboard grants/contracts they & Expenses for Budget-to-Actual Revenue oversee (a) each program & Expenses for (b) organization-wide Performance Dashboard (a) each program Statement t t of Activities iti (b) organization-wide id Balance Sheet and supporting schedules Cash Flow Projection Year-end Forecast 19 Statement of Activities Balance Sheet and supporting schedules Cash Flow Projection Year-end Forecast Board Committee Structure Audit Committee Hires the audit firm and oversees the audit process Stewards the systems of internal control Finance Committee Monitors and responds to the financial realities of the organization as presented by the Executive Director/CFO, in cooperation with the Treasurer Note: In some (particularly smaller) organizations, the finance and audit committees are combined into a single committee unless state law requires separation 20 10

11 Which financial management reports are distributed to decision-makers? Management Narrative 46% Budget-to-Actual Revenues & Expenses 100% Cash Flow Projection 69% Balance Sheet 100% 21 Budget A plan based on a series of decisions Forecast A report of what is expected to happen 22 11

12 Why take the time to forecast? Allows staff to proactively identify potential roadblocks Shifts the focus from analysis of the past to proactive management of future events Facilitates rapid adaptation to unanticipated changes in the funding environment Enables team to adjust plans to meet desired goals Define the forecasting schedule: Monthly? Quarterly? Forecast at the appropriate level of detail no need to reevaluate every budget assumption on an ongoing basis Incorporate information from relevant staff in the forecasting process: Expenses: Program staff who are making spending decisions Revenue: Development staff who have relationships with funders Report rolling forecast alongside the original budget 24 12

13 Year-end Forecast Template 25 Nonprofit Quarterly & FMA What financial reports does YOUR board need: Ensuring the mix fits your governance needs, a conversation with Hilda Polanco and Ruth McCambridge 26 13

14 Two Types of Costs: Controllable Non- Controllable 27 Analyzing & Interpreting Financial Reports Ensure roles and responsibilities in the process of reviewing, analyzing and communicating financial information are understood Incorporate training on financial monitoring into staff professional development plans Fiscal office customer service orientation: Accountability Responsiveness Timeliness Ability to explain financial data 28 14

15 Financial Decision-Making Meetings Frequency: Monthly or Quarterly Topics for discussion Budget-to-Actual Variances Rate of spending on contracts (if applicable) Anticipated future spending/cost control Completion of activities funded by restricted grants 29 Financial Decision-Making Meetings: Action Steps Form the team: Include key representatives from Program, Development, Executive Leadership, and Human Resources Establish a meeting calendar with specific dates, times, and topics for discussion/decision Ensure the right data and reports are available 2-4 days prior to the meeting for review by participants 30 15

16 Questions DASHBOARDS & PERFORMANCE MANAGEMENT 16

17 Performance Measurement definitions from the experts: Continuous tracking of data with the objectives of learning, accountability and continuous improvement KPI and performance measurement development is a discipline that involves articulating what an organization is trying to accomplish and then identifying the most meaningful and useful indicators of success. Regular measurement of the results (outcomes) and efficiency of services or programs Sources (from top to bottom): Measurement as Learning: What Nonprofit CEOs, Board Members, and Philanthropists Need to Know to Keep Learning, The Bridgespan Group, April 2011; The Balanced Scorecard ( Performance Measurement: Getting Results, Harry Hatry, The Urban Institute Press, The Performance Measurement Cycle: Identify areas for improvement and develop a plan Define Tie what you measure to intended impact Refine Implement Be consistent in data entry and interpretation Establish mechanisms to understand what is working and what isn t Evaluate 34 Monitor Track trends in metrics as well as process 17

18 By actively engaging in performance measurement, an organization: Aligns definitions of success across the organization Encourages dialogue about progress toward goals Facilitates timely identification of successes and challenges Grounds decisions in concrete data and evidence Illuminates relationships between different activities 35 Key Performance Indicators (KPIs): metrics used to assess performance Successful Key Performance Indicators (KPIs) will: Represent business model drivers Reflect progress toward intended outcomes Guide priorities and decisions ( what gets measured gets done ) The Key in KPIs is important: limit total KPIs to a number that can realistically be monitored A set of KPIs isn t forever: metrics should be periodically reassessed for efficacy and organizational alignment 36 18

19 Characteristic Description Common Mistakes Alignment with Priorities Metrics clearly tied to what is Metrics suggest importance of important to the organization data that is not meaningful Actionable Definition is Commonly Understood Calculation is Simple and Transparent Data Source is Accessible and Credible Metrics highlight the source of a problem and actionable steps / questions Metrics are understood by all stakeholders Metrics and their calculations are transparent and easy to understand Data can be regularly accessed from a reliable source Too many variables can impact the metrics or the metrics are uncontrollable Metrics are not clearly defined or have multiple interpretations Metrics combine many factors in a compound metric that is difficult to understand Data gathering is time intensive or overly complex Adapted from: 37 KPIs can be defined across all areas of your organization Financial Health Fundraising & Development Programs & Service Delivery Human Capital Marketing & Communications Outreach & Advocacy Information Technology Risk Management & Governance Facilities & Capital Projects 19

20 Today is the beginning: aim for brainstorming a menu of options to bring back to your team 10-minute KPI brainstorm: work in teams to identify possible KPIs for your functional area Consider: Can each KPI be measured? Will the KPI help the organization accomplish its objectives? Is the data consistently available? 15-minute KPI selection: work with your colleague(s) to select the specific KPIs that best address organizational priorities 39 Dashboards should be presented in a user-friendly format: Create a snapshot of organization performance Display current status and trends Clearly show performance against defined targets Highlight out-of-the-ordinary results 40 20

21 Options include: Microsoft Excel Graph-based Table-based Modules and functionality within current data tracking systems Accounting Software (Intacct, Abila, Financial Edge) Salesforce Dashboard software (e.g., Tableau, idashboards) Custom-built solution

22 Who is responsible for the dashboard? Who needs to be involved in its development? Who is accountable for the measures? Who will update the data? What is the purpose of the dashboard? Which programs and/or functions will the dashboard track? Which KPIs should the dashboard include? Who is the target audience? When will the dashboard be needed? What is a realistic project timeline? When should the dashboard go live? How often will the dashboard be updated? 44 22

23 Question 7 45 RESOURCES 23

24 How to Talk About Finances So Non-Financial Folks Will Listen, Bridgespan Group, and Tools/Leadership-Effectiveness/Lead-and-Manage-Well/How-to-Talk-About- Finances.aspx#.U1rKh_ldXwo Measurement as Learning: What Nonprofit CEOs, Board Members, and Philanthropists Need to Know to Keep Learning, Jeri Eckhart-Queenan and Matt Forti, The Bridgespan Group, How Hands On Atlanta Uses a Dashboard to Track Progress and Reach Its Goals,, The Bridgespan Group. A Nonprofit Dashboard and Signal Light for Boards, Blue Avocado, Hands-On-Atlanta-Uses-Dashboards.aspx Why Financial Dashboards Matter, and Five Pointers to Get You Started, Neela Pal, Forbes,

25 NPQ & FMA: Models & Components of Nonprofit Dashboards Webinar: Article: dels-and-components-of-a-great-nonprofitdashboard/ 49 ancial-management-models-of-a-greatnonprofit-dashboard/# StrongNonprofits.org In collaboration with the Wallace Foundation, FMA has created a library of tools and resources to help organizations become fiscally fit Four Topic Areas: Planning Monitoring Operations Governance 50 25

26 Online Tutorials for StrongNonprofits.org FMA offers complimentary orientation one-hour webinars that feature an overview of the website and drill down on several of its key resources Upcoming webinar dates: November 29, 2016 at 2:00pm ET January 24, 2017 at 2:00pm ET To register, or see upcoming webinar dates: For a 15-minute, on-demand webinar tour of the site: 51 QUESTIONS? 26

27 Workshop Topics Workshop 1: Telling Your Financial Story (September 14th) Workshop 2: Financial Planning (October 13th) Workshop 3: Financial Monitoring (November 3rd) Workshop 4: Operational Excellence (December 8th) 53 Session 4: Operational Excellence Date: December 8th Time: 9am 3pm Who Should Attend: Executive Director/CEO, Lead Finance Staff and other members of the finance team, or key members from the program and development staff Homework: Chapter 1 from Switch: Internal Controls Self-Assessment 54 27

28 55 Please complete and return the evaluation in your packet How did we do? 56 28

29 Established in 1999 to serve not-for-profit organizations around the country Provides customized financial management, accounting, software, organizational development, human resources, and other consulting services Works directly with organizations or through funder-supported management and technical assistance programs FMA's mission is to empower not-for-profit organizations with the knowledge and skills to successfully serve their constituents and fulfill their missions Hilda Polanco Gretchen Upholt New York Chicago Oakland Los Angeles /FiscalManagementAssociates linkedin.com/company/fiscal-managementassociates-llc 29