Created: August 1, 2013 at 12:18 PM | Updated: August 27, 2020 | By Community Resource Kit
A financial plan shows what your total expenditure is likely to be and when money will be needed to achieve the organisation's strategic goals and objectives.
A financial plan may include:
The financial planning process can be undertaken in six steps:
A budget helps the organisation with financial planning and control of inflows and outflows of cash and also the overall financial position.
A budget can be prepared in a spreadsheet, either electronically or manually. The treasurer usually has the key role in preparing the budget, but they will need to work closely with the other members of the organisation.
Once the budget has been approved, it should be added to your accounting system to ensure the organisation can compare it against actual income and expenses. If you use a cash book accounting system (either a computer spreadsheet or a manual cash book), it is still important to compare the actual financial performance with the budget (see Monthly reporting later in this section).
To prepare a budget:
TIP: You may want to start with your planned expenses to calculate the total cost. You can then focus on what income and funding you'll need to cover that total cost.
It is important to do some cash flow forecasting throughout the year so you can predict when there may be peaks and troughs in your income. Planning your activities around these fluctuations will help ensure that you can meet monthly fixed costs (e.g. wages) when your income is not coming in regularly.
By cash flow forecasting, you can also maximise interest earnings from investments by investing your money until it is required to pay for something.
To prepare a cash flow forecast:
Cash flow forecasts are an important tool for all organisations.
You can use forecasts to:
(Adapted from MBIE - https://www.business.govt.nz/tax-and-accounting/business-finance-basics/cash-flow-forecasting/)
Next page: Financial record keeping