Financially there are no simple solutions. Great, I just wanted to get this point out there so don’t shoot the messenger.
I said there are no simple solutions but there are proven basic financial practices that will be effective if you have the courage to be true to them individually.
Oh, by the way, this message is not for the accountants out there but for everyone else who I like to call the non-financial managers. If you are thinking this is not you, you are mistaken because the non-financial managers are everybody but the accountants. Yes, non-financial managers are the senior managers in your organization but they are also project managers, staff of all kinds and positions, board members and officers, committee members and volunteers, interns and fellows, and even members of your organization. What these people all have in common is that they are constantly making decisions both small and large that impact the finances of your organization. Even, a committee member who just raised his or her hand and made a very thoughtful recommendation at a committee meeting to change a programming function could and most likely just had a financial impact on the organization.
One of those proven basic financial practices that you have to be true to is Transparency. It is not easy and is time consuming but is effective if done timely and delivered broadly. The path for financial transparency goes directly through the budget process. “Watching Over the Numbers” is almost impossible without budgets being deeply imbedded in the culture of your organization.
Budgets used well become both a bridge and a yard stick. As an out right measurement tool, budgets provide a personal yard stick to measure how well your organization is progressing financially. Within seconds even a non-financial person can see if you are running ahead or behind as they compare actual results to the yard stick the budget. The picture can be made even clearer if the yard stick is presented in a well designed format that includes monthly budgets as well as annual budget numbers.
Budgets are your initial projection for the coming year. Adding to your monthly financial reports during the year the ability to roll out projections based on new evolving information allows you to expand the effective horizon of your budget reporting system. Simply put, projections allow budgets to shift from static to interactive and thus allow you to use your budget system as a bridge to managing future results and outcomes.
These two concepts delivered timely, not late, and broadly, to as many people as possible, will provide both the bridge and the yard stick for effectively “Watching Over the Numbers”.
Next time I will expand on effective budget and projection use.