Strategic Financial Planning

Strategic financial management refers to “the application of financial techniques to strategic decisions in order to help achieve the decision-maker's objectives”. It therefore describes the planning process required in order to reach our goals and achieve what we set out to do.

When setting about creating a strategic financial plan, it is important to consider what your longer-term needs are as well as your immediate needs. Although your immediate needs might seem more important, it is also imperative that the future is accounted for otherwise you may suddenly find that there is nothing to support the charity going forward.

To begin with, the current environment should be reviewed to ensure there is an understanding of the current activities and whether these are to continue or not.

Assessing the short-term objectives

As well as the current position, it is a good idea to think about what the charity aims to do in the next 6-12 months as these ideas should have already been formulated, or at least will be informally understood. Action points should be taken from these short-term objectives and turned into part of the financial strategy. The internal structure of the charity should also be looked at to determine whether the people, equipment and surroundings are capable of supporting current and new activities going forward. Be realistic at this stage - if they are not adequate, this will form part of the plan.

In the longer term it is worth thinking about new or different income streams that are more sustainable. Do you have a comparative advantage - something you could trade maybe? Perhaps you could gain sponsorship, set up a trading arm or use your volunteers to generate income. It is crucial to understand whether you are operating in a niche area offering something that no-one else does. If you do, it will be easier to gain funding or engage with service users. If there are other charities or organisations that offer similar services then part of the future planning may be towards becoming less grant reliant and more sustainable, joining forces with other like minded organisations or moving into a different field altogether.

Can you simplify your expenditure?

It is also important to fully understand the major costs to the charity, and look to simplify expenditure streams – can things be paid for in bulk for example? What long term commitments do you have, how will they be funded?

As well as looking internally during planning, external factors that may influence what the charity can and cannot do should be assessed to see whether or not they should be monitored. There is often not much you can do about these influences but in some cases such as with government legislation, some charities may be able to influence the final decisions that are made.

Once the information has been gathered it becomes easier to see whether original longer-term plans are likely to be achievable given the current climate. Once the plans have been agreed, the financial implications are then formulated and adapted to ensure they are manageable. It is then important to ensure that any changes are communicated to funders, donors, management and fundraising staff. Once the plans are communicated, don’t end there – you need to ensure you put in a process of monitoring and reviewing so that you can find out whether you are meeting your objectives. You can then use this information to feed back into a revised plan and the cycle continues.

For further information on how we can help your organisation, please call us on 01793 554 204 or email marketing@charitybusiness.com.