Tag Archive for: Finance

What is Financial Forecasting and Why Does it Matter to Nonprofits?

/in , , /by

Financial forecasting is a term you’ll hear thrown around in the business world quite often—but in the world of nonprofits, it can be difficult (and even downright impossible) to plan your organization’s finances with any degree of certainty. After all, you can’t possibly predict:

  • Who’s going to donate to your organization
  • How much they’re going to donate
  • Even when donations are going to happen

Still, even as a nonprofit, having some sense of what your finances may look like in the future is crucial to your long-term success. The best way to do this is through financial forecasting.

With a better understanding of what financial forecasting for nonprofits entails and how to use financial forecasts to your organization’s advantage, you can work more confidently toward long-term success and sustainability.

What Is a Financial Forecast for Nonprofits?

Specifically, a financial forecast, sometimes called a projection, is an estimation of an organization’s projected financial conditions based on past and current finances. Financial forecasts can then be used by nonprofit organizations for:

  • Budgeting
  • Strategic planning
  • Fundraising
  • Grant applications
  • Even cash flow management

While not always 100% accurate (especially in the unpredictable realm of nonprofits), a financial forecast can be extremely useful when it comes to informing decision-making and mitigating risks.

What is the Difference Between a Forecast and a Budget?

Let’s break down the difference between a fiscal budget and a financial forecast in a nonprofit setting. Think of a fiscal budget like your organization’s financial game plan for the year. It’s set before the year kicks off and includes all the money you expect to come in (like donations) and go out (like program expenses). It’s your guide for how you plan to spend and receive funds, kind of like a financial blueprint for the year’s activities.

Now, a financial forecast is more like checking the financial temperature throughout the year. It’s not set in stone like your budget. Instead, it changes based on what’s actually happening in your organization. Say you get a surprise donation, or an event costs more than planned – your forecast helps you adjust your expectations and plans on the go. It’s a real-time snapshot that helps you stay flexible and make smart money moves as the year unfolds.

Key Components of Financial Forecasts

So, what are some of the key components of a financial forecast for a nonprofit organization? While no two nonprofits will be exactly alike, most should include the following in a comprehensive financial forecast:

  • Revenue projections
  • Expense projections
  • Cash flow analysis

In addition to these key components, there are some basic documents and records that you’ll need to create a financial forecast for your nonprofit. This will include all of your organization’s financial statements, such as:

  • Income statements
  • Balance sheets
  • Cash flow statements
  • Annual budget
  • Any projected fundraising goals (we like our clients to have a gift table that includes specific gifts and when they hope to receive them based on historical knowledge).

Using Financial Forecasts for Nonprofits

There are many ways in which a financial forecast can be used by nonprofits and their leaders to make smarter and better-informed decisions for the long-term success of the organization. 

Let’s take a closer look at some of these areas:

Budgeting

For many nonprofits, financial forecasts serve as a reliable foundation for creating budgets that can help organizations make better use of their funds and other resources. By projecting revenues and expenses, nonprofits can develop realistic budgets that align more closely with their goals and priorities.

Strategic Planning

Nonprofits can also use financial forecasts to gain insights into the future financial health and sustainability of the organization. These projections can then be used to identify potential risks and opportunities, allowing leaders to make strategic decisions regarding things like:

  • Program expansion
  • Fundraising initiatives
  • Resource allocation

Fundraising and Grant Applications

It’s no secret that nonprofit organizations rely heavily on grants and other forms of fundraising in order to keep working toward their respective missions. When applying for a grant or seeking other fundraising options, it is not uncommon for nonprofits to be required to submit a financial forecast in order to even be considered.

Understandably, donors and granting agencies want to see a clear roadmap of an organization’s financial stability and responsible resource management before making a donation. In this sense, accurate financial forecasts can actually help to boost an organization’s credibility while increasing the chances of securing funding.

Cash Flow Management

Being able to accurately forecast cash flow is crucial for many nonprofits, yet doing so can be a real challenge when you can’t always predict when donations and funds are going to come in.

Fortunately, financial forecasting can be extremely useful in more accurately predicting cash flow in a nonprofit. By projecting when and how much cash will be coming in and going out, organizations can more readily anticipate potential shortfalls, manage liquidity, and make informed decisions about everything from investments and expenses to cash reserves.

Need Help with Financial Forecasting for Nonprofits?

When it comes to making more informed and confident decisions for the future of your nonprofit, being able to rely on a financial forecast can be extremely useful. At the same time, financial forecasting isn’t always easy—especially for nonprofit leaders who have other important obligations to focus on.

This is where it can be especially useful to work with an experienced team of accountants and other financial professionals who offer nonprofit accounting and bookkeeping services, including financial forecasting. 

At The Charity CFO, we’ve been trusted by hundreds of nonprofits to assist with everything from basic bookkeeping to financial forecasting and everything in between. Our philosophy is that when you don’t have to worry about the books, you can focus more readily on what matters most: pursuing your nonprofit’s mission.

Interested in learning more about our nonprofit accounting services? Get in touch with our team today. We’d love to learn more about your organization and help you determine which services may be best for your needs.

No time to read this article now? Download it for later.

How to work with your donor’s financial advisors to create the greatest impact.

/in , /by

 

 

On this week’s episode of A Modern Nonprofit Podcast, CEO Tosha Anderson invites David Foster,  CFP®, CAP® as her guest. David Foster is a financial advisor at Gateway Wealth Management of our client.

David speaks about, “How to work with your donor’s financial advisors to create the greatest impact”. He gives advice to listeners on should development officers ask for specific dollar amounts why or why not? He also hits on whether or not development officers should be afraid to ask about planned giving and how to be direct when asking about planned giving? Should you ignore your donor’s team of professionals, CPAs, Attorneys, Financial Advisors, when asking for large gifts? Or should you offer to reach out and get to know your donor’s professional advisors? You may think that getting a donor’s professional advisors involved will increase the time you spend and reduce the size of the gift you ultimately “bring in.” What are the three reasons the opposite is true?

These are just a few questions David answers, this episode is an interesting conversation with to experts in their fields.

This episode is a must listen.

Follow David’s career and reach out for any help with all nonprofit donor questions and more.

Here is how to get in contact with David Foster.

Website: gatewaywealthstl.com

Click on Talk with David

Email: [email protected]

Phone: 314-349-2711

7 Common Fundraising Mistakes to Avoid for Nonprofits

/in /by

Are you trying to build a strong foundation for your nonprofit? Well, it all begins with knowing the in and outs of the entire structure. In premise, the difference between a good and a bad nonprofit is the ability to avoid common fundraising mistakes. 

In this article, we will cover these 7 mistakes, so that you can build a project that’s truly exquisite. Read on to learn more. 

Building a successful project through fundraising is important to your organization’s success.

1. Untailored Messaging

When you’re talking to your supporters, a one-fits-all application does not work. You need to know what works for each target audience and hone your messaging for each segment of your donors. 

Segmenting your supporters into separate groups is critical to making sure that the right message is delivered to the right person at the right time. You can accomplish this by breaking down the entire collective into smaller sub-sections, such as big-donors, first-time donors, recurring-donors, event attendees, third-parties, etc.

You might even consider developing donor characteristics to help with driving action on their part. Once you have segmented your audience, it’s much easier to tailor content for each, thus build real relationships.

Stronger bonds = greater number of financial commitments. 

2. Not Talking About the “Why?”

Most of the nonprofit organizations spend too much time talking about how they will perform their work, rather than why they will do it. 

After all, you’ve adequately enough to create a solution to an important problem with dedication. But to get people to appreciate such efforts, you need them to provide context. Make them care. 

This means that you have spoken about the “why” before you even mention the “how. First, speak about the challenges you have addressed, then speak about how you solved them. This will spark genuine connections with you on the empathetic level which will help them to action. 

Don’t assume that your supporters know everything about you. Just because they’ve decided to donate, doesn’t mean they have an understanding of your work and its importance. 

Make use of the opportunity and give them the full story. 

3. Common Fundraising Mistakes: Wrong Relationships

If your relationships with the supporters are purely transactional, they will move on. If they are relational, they will continue to thrive and blossom. 

With the use of modern technologies, it can be very easy to bombard your sponsors with asks across all channels. Taking this unthoughtful approach to why and when you ask your sponsors for contributions will result in disconnection and donor fatigue.

4. High Expectations, Poor Outcomes

Do not set high expectations and then deliver poor outcomes. Consistency is critical to reputation. Be realistic, honest, and transparent about all of your efforts and outcomes. 

In terms of the marketplace, reach and services, be consistent when articulating their effect. Meet the expectations set by important stakeholders, and deliver exceptional services. 

Exceed all expected outcomes.

5. Lack of Financial Competency

A most important faculty of the nonprofit experience is financial competency. Many founders have not anticipated what it will truly cost to start the nonprofit, much less where to get the funds. 

Any nonprofit needs a funding plan, which will decide if it will charge fees for services, and an effective records system to micromanage all resources. A nonprofit with poor funding is very unlikely to sustain itself before even implementing a verbose fundraising structure.

And even that’s not enough. Financial competency is vividly important in a nonprofit, so don’t dismiss it. 

6. Ineffective Board

If there is one thing that could break or make your project, it might be the quality of your board. Your initial boar members must be your true circle of influence. They should be those who have the influence, resources, and contacts that can help this project grow. 

They should believe in the mission of the organization, and be willing to sell that mission to anybody else. They are the gate-keepers who should help to open doors for you.

And where do you find such people? Well, that depends on the mission behind the nonprofit. But it’s all about networking, so visit meetings, conventions, conferences, and anything else that might be pertinent to the problems that you are trying to solve.

7. Failing to Communicate

Using a single channel for communication is shortsighted. All of your supporters are different. They have different genders, ages, capacities, etc. This is why a variety of communication channels is important to appeal to different people.

You need to have multichannel network strategies that will allow you to effectively collaborate and converse with donors regularly.

Many of your supporters and donors will respond best on certain communication channels. Some might be completely blind to invitations, CTAs, or other asks shared on single channels. 

In order to avoid this, segment your donors on the basis of their preference for communication. Or simply reach out to them on a platform, if you’ve sent an invitation over email, reach out to them by phone afterward.

Accounting Services for Your Nonprofit

Now that you know about the 7 common fundraising mistakes that will ruin your nonprofit, you are well on your way to build a solid foundation for your endeavors. As long as you avoid the pitfalls of others, and make wise decisions supported by an educated and influential board, there is no reason your mission is any less than the big fish. 

If you’re interested in solving one of 7 mistakes, being that of “lack of financial competency”, get in touch with us and we will happily walk you through our accounting services.