Top 10 tips for financial management
Sally Wardle, Group Chief Accountant
Budgets and forecasts
An annual budget is the starting point – get to know your budget income and costs, be familiar with what the boundaries are. Budgets should be manageable and motivational. If possible, consider a reforecast exercise (perhaps at quarter-end points) to check your organisation’s performance against that budget, and to update with any significant changes that would impact on your ability to meet the original budget (eg winning a new contract, losing members of staff or a significant change in rents payable). Preparing a forecast as well as a budget helps you manage internal and external expectations. Why not start thinking about the next year’s budget before you get there? Business plans are not reserved for commercial enterprises – anyone can do one, and what supports any strategy should be the finances to make it happen.
Reliable reporting
It might be stating the obvious, but it’s really important to know what’s going on in your accounts – and not to wait for the year-end report! Good practice is to prepare monthly management accounts (profit and loss/income and expenditure accounts, and a balance sheet) to keep track of your performance against budget (or against forecast!).
Accountability
Following on from having a well thought out budget is the obvious requirement to instil accountability for all budget holders. Staff who are put in charge of a budget should be responsible for managing that budget – and reporting against it internally and externally, and at the highest level. It makes sense to hold staff accountable for things that are within their control (eg pricing policy, or travel and subsistence costs that they sign off).
Cash is king
Operational cash is key to keeping afloat in challenging times – sadly, many businesses fail not because they are not profitable or well managed, but because they don’t hold on to their cash resources. It’s a good idea to draw up a cashflow forecast for your organisation – to see where there are any pressure points – and consider how you would respond if your organisation got into difficulty. Could you defer payments to suppliers without losing goodwill or trade credit? What would you do if a grant receipt slipped by a month – do you have sufficient resources to cover this? What are your banking arrangements like? Being on good terms with your bank manager helps so it’s a good idea to keep in touch.
Overhead cost controls
Overheads (those inescapable business costs that you incur however large your business grows) can eat up a big chunk of your total operational costs so consider ways to make savings. Look at your spend on insurance, utilities, stationery and printing, postage and distribution, telecommunications – even bank charges. Opportunities may be out there to reduce these overheads without having any significant impact on your organisation and your KPIs so it’s a good idea to shop around.
Staffing savings
There are opportunities out there for employers to make savings on their employer National Insurance costs. For example, do you have an employee pension scheme, and if so, have you considered pension salary sacrifice? Speak to a pension adviser, who can explain how this might work.
Policies and governance
Underpinning any cost-control exercise is a strong set of policies within your organisation to ensure everyone knows what they are doing – it’s a good idea to have a Financial Procedures Manual covering guidelines on travel and subsistence claims, designated limits for purchasing, tendering policies, capital expenditure etc.
Be risk-aware
A higher than average proportion of fraud and financial crime is targeted at charities and not-for-profit organisations, and therefore it pays to be aware of the risk of such fraud and take reasonable steps to prevent it. Being risk-aware means having controls in place over electronic data, as well as financial data – change your passwords regularly if you log on to manage your bank account, keep controls over computer assets etc.
Networking
It not only improves your social life, but also provides an opportunity to see what your peers are doing to manage their financial resources and share knowledge and feedback about products and services they may be using. There are meetings or conferences out there (eg the annual Finance and Governance Forum, supported by the Sport and Recreation Alliance, UK Sport and Sport England) that provide just such an occasion to share financial knowledge, and it is a good idea to make use of them when you can.
Invest
Finally, good financial management takes time, and needs to be given priority by your senior management team – too often, finances are neglected in favour of other, sexier-sounding areas of the business. You should invest your time in getting to know the numbers and make them work for you. Whatever your background, no one should be able to hide behind the excuse that they’re ‘not good with numbers’!
