Do This Now For Your Finances
Judy Krause, MWA Associate |
It’s summer! Time to relax and find ways to rejuvenate. While finding time to refresh personally, now is not the time to lose focus on how your organization is performing financially.
If your organization’s fiscal year matches the calendar year, you have recently entered the second half of your year. Time to put on the cruise control? Of course not! Now is a critical time to assess your six-month financials and understand what is likely to happen over the final six months.
An important component of an organization’s budget cycle is to evaluate the budget. Mid-year is one of the most important times to evaluate, forecast, and strategize. The work you do now impacts your current-year financial results and begins the process of budget planning for next year.
To start your mid-year budget review:
- Review your six-month financial statements, including budget-to-actual results.
- Look for major discrepancies in performance to date – revenue and expenses that are significantly higher or lower than 50%. For budget amounts that do not occur evenly throughout the year, how do the results to date compare to the amounts you would expect at mid-year?
- Engage with your program, fundraising and finance staff – what trends are they seeing? What has changed for them in the expenses and revenue they are managing?
Budget review questions to ask:
- Why are certain revenues and expenses off-track?
- Is there a reasonable pathway over the next five months to achieve our revenue and expense plans? If not, what do we need to modify and how will we do so?
- Are we forecasting a surplus or deficit at year-end?
- Are cash levels where we expect them to be at this point in the year? Where are cash levels projected to be at year-end?
- What are our biggest risks for the next six months? What are our opportunities?
- How will our forecast for year-end impact our plans for the following year?
Engage Your Board
- Report to your finance committee and board on a summary basis – focus on the major items.
- Be honest about potential challenges.
- Discuss the support you need from board members to help accomplish your organization’s financial goals.
When are other important times to evaluate your budget? Any time a major change occurs – a global pandemic is certainly a reason, but major changes could include a new funding opportunity, significant staffing changes, or a major donor deciding to reduce or end their funding support.
Whether you have entered the second half of your fiscal year, or you find yourself in a different timeframe of your budget year, you are always in the midst of your annual budget cycle – whether creating, executing or evaluating.
Set yourself up for success and deeper impact by understanding and strategizing your financial situation. Need help getting started with forecasting? Give us a call!