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Financial strategy

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Develop a financial strategy for your organisation, to help you plan for your financial future.

Why have a strategy?

Many organisations manage income from a number of different funding and finance sources – from donations, grants, contracts and income generated from trading.

A financial strategy can help you to set goals and make it easier for your board and staff to work towards a more diverse and stable income mix. It should set out:

  • your current financial situation
  • what you need funding for
  • your funding objectives and how these relate to your mission
  • your income aims for the next three to five years, including your ideal income mix for the next three to five years, for example what percentage of your income will come from each income source
  • where you hope to increase or decrease income, for example ‘we want to increase our traded income by 25% over the next three years’
  • your key funding relationships (do you have a strong relationship with a particular trust? Are you heavily reliant on one donor?)
  • any new relationships that will be essential to achieving your objectives
  • any resources you need to achieve your financial objectives (people, skills, knowledge, networks, equipment)
  • an analysis of the main risks and barriers to funding
  • your reserves policy: how you will balance spending and saving.

Your financial strategy should be part of your overall organisational strategy or business plan

It should be clear how your financial objectives align with your mission and overarching strategy. Be careful not to chase funding that will take you too far away from your mission. Our mission matrix tool can help you plan for this.

How does this fit with our business plan?

If you want to increase the amount of income you’re getting from a particular source, a financial strategy can help you allocate appropriate resources to achieve your financial goals.

For example, if you want to develop a new donor programme, you’ll need to ensure that you have staff or volunteers who can help to build relationships with donors. This can be extremely time consuming, and requires marketing and communication skills. It may mean that you won’t have the capacity to develop other funding sources at the same time. A new donor strategy could affect your plans for recruitment, operations, marketing and impact reporting, so you’d need to demonstrate this within your business plan.

Who should be involved in planning for funding and income?

Fundraising is something that nearly every member of staff can get involved in. Equally, financial planning and strategy is not something that should be limited to a finance team or the chief executive.

Sustainable funding works when all parts of the organisation contribute to the planning and delivery of a financial strategy.

In order to attract funding, you’ll need:

  • to be good at marketing and demonstrating the impact of what you do to funders, as well monitoring the success of your activities
  • to have a clear idea of how much money you need in order to achieve your objectives
  • to have a clear vision and a strategy based on a thorough knowledge of your policy environment and your beneficiaries’ needs
  • you also need to be good at managing relationships with donors, grant funders, commissioners or customers.

It’s unlikely that one person will do all of these things (although in some very small organisations the chief executive does most of them).

Your finance person or chief executive can only make projections on the information they’re given, so it’s important that all teams or departments have some awareness of how they contribute to the overall financial strategy. It can be very hard for fundraisers or business development managers (ie the people who sell what you do) to work on their own, without the benefit of the insights your project staff or communications people get from talking to your beneficiaries, partners or customers.

Keeping your team up to date

Make sure that your successes are shared and celebrated internally as well as externally, so that everyone in your organisation knows how to promote what you do. It can be helpful to have a set of basic stats that you share on a regular basis, alongside a fundraising goal: eg ‘this year we’re hoping to raise £50,000 for our new community kitchen. Last year, our kitchen helped improve the health of over 300 families and worked with 12 local schools.' This means that all of your staff have fundraising information at their fingertips, and can therefore be marketing your organisation all the time.

What is the role of the finance team?

Your finance function – whether that is a team or an individual – can add value to both planning and management. The key roles are:

  • providers of information for decision making
  • business management.

Financial managers will need to assess what information they have, particularly costs and income projections, to be able to control or plan for the future. They will also help to provide accurate costings for funders or commissioners. These will show that you have researched any proposed project costs and can make well-informed projections about future turnover and the sustainability of the project.

What's the role of the trustee board in planning for funding and income?

The financial management role of a voluntary organisation’s trustee board is quite different to a commercial organisation. The three main financial management functions of the board are:

  • financial monitoring (for example, ensuring that the organisation’s assets are used to  pursue its charitable objectives)
  • procedures (for example, financial controls and risk management, publishing annual reports and accounts)
  • management (for example, approving annual financial statements and budgets, ensuring appropriate insurances are in place).

Most voluntary organisations are financially accountable to a far greater number of stakeholders than commercial organisations, which could include the Charity Commission, Companies House, HMRC, the general public, local government and charitable trusts. The board needs to ensure that the right financial information is collected and reported in compliance with the law, and in-line with any contracts or funding agreements.

The whole trustee board must demonstrate value for money and effectiveness. They must work with the chief executive to ensure that appropriate monitoring is in place to show the impact and effectiveness, and that funds are being used for maximum value.

See the funding and income overview page for more information on convincing your board of a new approach.

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Page last edited Sep 10, 2020

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