Small Charities, Big Impact: The Cash Flow Advantage

If your charity is lucky enough to be experiencing rapid funding growth, you'll also notice a corresponding uptick in your weekly finance-related tasks.

While increased funding is undoubtedly a positive development, for directors and managers, it can translate into a substantial increase in your workload.

Salaries can be lower than the market averages so finding experienced financial planning expertise might provide a bit of a challenge, and if your charity is global or multi-region you will also have to cope with the added complications of varying currencies, time zones and reporting regulations for multiple charity commissions.

If your budget has grown 10x you could find yourself spending half your week dealing just with your financial planning which leave you with little time to manage your projects effectively

Fortunately, there's a growing availability of financial applications designed specifically for charitable organisations. These modern, user-friendly platforms can assist you in automating data updates, facilitating seamless collaboration, and streamlining planning processes with your finance managers. By doing so, your finance team can allocate more time to error checking and strategic initiatives.

While spreadsheets hold a special place in the hearts of financial planners and excel (pardon the pun) in certain tasks, the management of intricate budgets, cash flows, and reports can be significantly improved through the adoption of multi-dimensional modelling techniques similar to those used by larger commercial enterprises, previously unavailable to most charities due to their high cost.

We have conducted research to identify the financial planning pain points and opportunities for smaller charities operating on limited budgets and we have distilled hours of in-depth interviews into the following advice:

GAIN CONTROL OF YOUR CASH FLOW

One common headache for small to medium charities is monitoring whether people are going to pay on time. You may need to get creative when a company doesn't send their donation money on time in order to keep your programs running and this takes up even more of your precious time.

Traditional accounting software often struggles with reliable cash flow planning due to its intricacy and tedium. The good news is, there are a number of useful new products available today that help with income forecasting, cashflow planning and advanced financial modelling.

"Planning can still be tedious, complex and really annoying, far more robust and user-friendly options are now available"

Simon Ritchie, CEO, www.blox.so

First step: effectively track and manage your cash

Keeping tabs on cash payments, withdrawals, and receipts can become quite a time-consuming and confusing task. Fortunately, several accounting apps can come to your rescue, though there are many more options available as well:

1. Xero: has a "Cash Coding" feature that enables you to record cash transactions, including expenses and receipts. You can manually enter cash transactions and attach scanned or photographed receipts to them. This helps you maintain a complete record of your cash expenditures and receipts within the Xero platform.
2. QuickBooks: provides a similar capability through its "Expense Tracking" feature. You can enter cash expenses and attach digital copies of receipts to each transaction. QuickBooks also offers a mobile app that allows you to snap photos of paper receipts and instantly attach them to expenses, making it easy to track cash usage on the go.

Both platforms provide tools to track and organise cash transactions and receipts, ensuring you have a clear record of your financial activities.

"In most regions 'cash is king'. It's the fastest and most effective method of making a positive impact quickly and keeping the project on track but it's also the most time consuming and in some cases open to fraud – so you are required to record and match receipts from every finance manager"

Clément Taquet, Executive Director | Concrete Jungle Foundation

Second step: implement a rolling forecast

In smaller charities you need to be fast to react when things change quickly. A clear picture of your finances on a daily and weekly basis is ideal.

If, for example, you are using spreadsheets and manually checking them with your bank accounts every 3-4 days they may be accurate but the process is time consuming.

A better approach would be a rolling forecast, here are two options:

1. 12-Week Rolling Cash Flow Analysis: This feature provides you with a clear understanding of your cash flow over the upcoming 12 weeks. This knowledge is paramount as it helps you anticipate potential cash shortages or surpluses in the near term.
2. Long-Term Planning: Beyond the immediate 12-week horizon this will empower you to engage in comprehensive long-term planning exercises. This functionality allows you to take a more strategic view of your financial future.

You could have a million great projects to run but a limited budget. So you have to choose your best options and that's a struggle where scenario forecasting would really help

TAKE YOUR CASH FLOW TO ANOTHER DIMENSION

When you transfer your financial planning to a multi-dimensional platform, it makes this whole process easier and much simpler. You can then tweak your own assumptions about payment schedules, just like you would with a spreadsheet but this is more reliable and robust with everything in one place - rather than multiple separate spreadsheets.

Multi-dimensional modelling truly shines in cash flow planning, a task that traditional accounting software often struggles with due to its intricacy and tedium. It also allows for an easier breakdown of regions/products and robust scenario planning.

Forecasting different cash flow scenarios is crucial for mitigating risks, making informed decisions, and ensuring financial stability in an ever-changing business environment.

We hope you gained something useful from our research so far, please like, share and follow if you enjoyed this article and value any future insights from our team.

JOIN OUR RESEARCH

If you are interested in contributing to our research into Housing Association FP&A solutions, pain points and partnerships please comment below or get in touch here via LinkedIn.

WHO ARE BLOX?

Blox aims to supercharge your financial planning and modelling.

Craft powerful financial models, automate data updates, collaborate and plan seamlessly and reclaim hundreds of lost hours spent on tedious tasks.

Become the strategic finance powerhouse your business needs with Blox and take planning to the next level visit www.blox.so

Checkout our blog for further insights on effective planning.