Financial Planning and Control

Building Blocks

Four building blocks of good financial planning

Keeping records

Internal Control

Budgeting

Financial Reporting

Everything starts from information

Capturing financial information

Interpreting captured information

Acting on the interpretation

Types of Information

Attention-directing information: The finance manager provides reports to activity or section

managers on actual expenditures to budget. She further highlights the areas where there are
considerable over or under expenditures. This information directs the activity manager to
investigate or justify delays in implementation or unforeseen expenditures.

Score-card information: A donor requires a report on their funds twice yearly to see if
planned activities are on track or if there are any deviations noted. The numbers laid out in the
financial report comparing actual expenditures to budget provide a 'score card' on how the NGO
is progressing with their proposed activities.

Problem-solving information: An NGO would like to host a workshop. This workshop will be
funded through donor funds, income earned from the sale of workshop books and by charging a
small participants' fee. The finance manager can provide information to management on how
much funds exist currently for the workshop and how much money would be required to be
raised by additional fees.
Overall Architecture

Target
Roadmap Budget: Budget :
Focus Map : Where we Define targets for key deliverables,
What will we do to aim to be revenues and costs
achieve our by the end
performance measures of the
Focus Map :
next
period Laying down the road map for
the period and defining action items
Here Next time for sustainable growth
and Now we meet
Review Process :
Review Process A practical and regular review
process to track progress towards
targets and provide guidance

Balanced Scorecard :
Scorecard : S.M.A.R.T. review tool to track
How well did we do in the period achievement of Budget and Focus Map
objectives
Review Tool

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Structure of the Forms

Balanced Scorecard

Top 2-3 Scorecard

Parameters which Other Scorecard
directly affect Parameters
revenue or costs.
Focus
Areas
Budget Initiatives planned in
Revenue Guidance
the short term

Cost Dashboard

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Balanced Scorecard

Internal
Process Mission
“Who are our The balanced scorecard is a
“To satisfy our
targets, in which targets? What is strategic planning and
internal processes our value management system that is used
must we excel?" proposition?” extensively in business and
industry worldwide to align
business activities to the vision
NGO and strategy of the organization
and monitor organization
performance against strategic
Financial Learning &
goals.
Growth
“To fulfill the
Mission, how “What
do we fund capabilities and
Internal tools do our
Processes?” staff require to
help them
execute our
strategy?

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Sample Balanced Scorecard for a non profit human
services provider

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Financial Planning and Budgeting

What are the objectives of the project?

What activities will be involved in achieving these objectives?
What resources will be needed to perform these activities?
What will these resources cost?
Where will the funds come from?
Is the result realistic?

Budgetary Control System

A system designed to provide management with the information necessary to keep

encumbrances and expenditures within an allotment
Provides report for both revenue and appropriations
Compares actual financial activity to the original budget and adjusted budget
Should be used by the management to monitor and control activity during the year
Projecting your Financials

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Financial Ratio Analysis

Financial ratio analysis is one of the tools used to improve financial decision making

Ratios use financial data to summarize organizational performance

Financial analysis applicable to profit entities is only partially useful for nonprofits.

Profit margins mostly do not apply

Revenue streams are different

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Some commonly used financial ratios

Income Ratios
Some commonly used financial ratios

Expense Ratios
Some commonly used financial ratios

Balance Sheet Ratios

Good financial management

Makes sure that money is carefully controlled, reducing the risk of fraud

Helps managers and field staff understand the financial position, today and in
the future

Builds trust between different beneficiaries, field staff, managers and donors,
through financial transparency

Makes sure there is enough money to complete activities and pay salaries

Supports decentralized decision-making and flexible planning

Helps strengthen dialogue with beneficiaries, e.g. by setting budgets together

and discussing financial issues together

Encourages managers to work out which specific activities will contribute to

wider social changes

This depends on finance staff and programme staff working together - which is
the very heart of good financial management in NGOs

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