How to Facilitate Agile, Insight-led Decision Making Via Regular Financial Snapshots

For charity CEOs and trustees, making informed, data-driven decisions is a critical part of running a successful organisation. However, financial information can often feel overwhelming or too technical to process effectively. The solution is regular, clear, and concise snapshots of the charity’s financial health, which allow you to act quickly and confidently, without getting bogged down in complexity. This approach helps facilitate agile, insight-led decision-making, ensuring that the charity can adapt, stay on track, and allocate resources efficiently.

In this article, we will outline a simple yet effective framework for summarising and presenting your charity’s financial position on a monthly basis. We will cover the essentials: summarising your Profit & Loss (P&L) versus budget, cash flow, balance sheet, and forecasting, as well as highlighting key areas that need attention. By implementing this practice, you will empower your charity’s leadership team and trustees to make proactive, informed decisions.

1. Summarise Financial Information on a Monthly Basis

The core of effective financial oversight is ensuring that key information is readily accessible, regularly updated, and easily understood. A monthly snapshot of financial performance should provide a high-level overview of your charity’s financial health, flagging any critical areas that require immediate attention. This allows trustees and senior leadership to steer the charity towards its strategic goals and avoid potential financial pitfalls.

Key components of your monthly financial snapshot should include:

  • P&L (Profit & Loss) vs Budget: How is income tracking against expectations, and are expenditures staying within limits?

  • Cash Flow: What is the current cash position, and do you foresee any liquidity challenges in the near future?

  • Balance Sheet: What are the charity’s assets, liabilities, and equity, and how does this reflect the long-term sustainability of the organisation?

  • 12-Month Forecast: What are your projections for the next year, and are you on track to meet your financial goals?

Each of these elements should be summarised in a way that allows for a quick assessment of performance and an early warning system for any areas that need intervention.

2. Summarise P&L vs Budget: Highlight Variances

A Profit and Loss (P&L) statement summarises your charity’s income and expenditure over a given period. Comparing this against your budget allows you to assess whether you are on track to meet your financial targets and goals.

Actions to take:

  • Compare Actuals vs Budgeted Figures: For both income and expenses, compare what was actually received/spent with what was planned.

    • Income: Are you meeting fundraising targets? Are grant funds or donations coming in as expected?

    • Expenses: Are costs under control? Have there been any unexpected or disproportionate increases in specific categories (e.g., staffing costs, programme expenses)?

  • Identify Significant Variances: Any significant deviations from the budget (positive or negative) should be flagged immediately. For example:

    • Underperforming Income: If income is below budget, ask whether it’s due to a timing issue (e.g., grant receipt delays), or whether a longer-term strategy revision is needed.

    • Over-expenditure: Unexpectedly high costs in key areas, such as programme delivery, may require immediate review to understand if they’re a one-off or indicative of a trend.

Decision-Making Based on P&L: Variances should trigger action items, such as revisiting fundraising efforts, tightening expenditure controls, or shifting resources to more effective programmes. For instance, if income is lower than expected, leadership may decide to launch an additional fundraising campaign or adjust the scope of activities to conserve cash.

 
 

3. Summarise Cash Flow and 12-Month Forecast: Ensure Liquidity and Sustainability

Cash Flow Summary:

The cash flow statement shows the movement of cash in and out of the organisation, which is vital for understanding whether you have the liquidity to meet immediate financial obligations (e.g., paying staff, suppliers, and service providers). A charity can be profitable on paper but still face cash flow issues if income is tied up in grants or other receivables.

Key Actions:

  • Monitor Cash Flow Trends: Highlight any negative cash flow trends and identify if there are any periods when cash outflows will exceed inflows (e.g., large programme costs, scheduled grants disbursements).

  • Flag Potential Liquidity Issues: If the charity is running low on cash reserves, consider:

    • Short-Term Borrowing: Can the charity access short-term funding or a revolving credit facility to bridge gaps?

    • Rescheduling Expenditure: Can non-urgent costs be delayed or reduced?

12-Month Forecast:

In addition to monthly cash flow summaries, a rolling 12-month forecast gives a more detailed picture of your future financial position. This forecast should update regularly based on actual results, ensuring that the charity’s financial trajectory is closely monitored and adjusted in real-time.

Key Actions:

  • Update Forecast Regularly: Regularly revise your forecast based on new financial data, adjusting for trends and any significant changes in income or expenditure.

  • Plan for Seasonal Fluctuations: Charities often experience seasonal fluctuations in income (e.g., higher donations during the holiday season). Ensure your forecast accounts for these peaks and troughs.

A well-maintained forecast helps identify potential cash flow shortfalls well in advance, giving trustees and CEOs the time needed to take corrective actions, such as increasing fundraising or adjusting programme delivery.

4. Summarise the Balance Sheet: Assess Long-term Financial Health

The balance sheet provides a snapshot of the charity’s assets, liabilities, and equity at a given point in time. While it’s not a document you’ll need to focus on daily, it is an essential tool for understanding the charity’s financial resilience and long-term sustainability.

Key Actions:

  • Review Key Metrics: Focus on the charity’s liquidity ratios (current assets vs. current liabilities) and solvency (long-term liabilities vs. assets).

  • Identify Potential Risks: If liabilities are rising faster than assets, or if the charity is carrying significant debt, this could signal a need for closer scrutiny. Trustees should discuss whether the organisation has sufficient assets to cover its obligations in the long term.

  • Decision-Making Based on the Balance Sheet: A weak balance sheet may require decisions to strengthen reserves, cut costs, or even seek new sources of funding (e.g., loans, or capital campaigns). If the charity is debt-heavy, leadership may explore options for restructuring or renegotiating terms to reduce financial pressure.

5. Regular Financial Review Meetings: Making the Information Actionable

The information is only useful if it prompts timely action. A clear and simple financial snapshot, supported by a monthly meeting, ensures that the charity’s leadership can make decisions based on the latest available data.

Key Actions:

  • Set Regular Review Meetings: Schedule monthly or quarterly financial review meetings with the senior leadership team and trustees to go over the financial snapshot and discuss action plans.

  • Prepare for Scenario Planning: In these meetings, use the financial data to create "what-if" scenarios. For example, “What happens if we face a shortfall in grant income?” or “What if we need to scale back programme delivery due to higher-than-expected costs?”

  • Monitor Key Metrics: Focus on key performance indicators (KPIs) such as cash reserves, fundraising performance, and programme cost-efficiency. Ensure that trustees are empowered to ask critical questions and make decisions based on financial data.

Conclusion

Regularly summarising financial information in an easily digestible format is essential for facilitating agile, insight-led decision-making. By creating monthly financial snapshots that highlight variances between actuals and budget, assess cash flow, and project future financial trends, charity CEOs and trustees can ensure the organisation stays financially sound and can adapt quickly to changing circumstances.

By using these snapshots to inform discussions, make adjustments as needed, and plan for the future, you will not only protect the financial health of your charity but also position it for long-term sustainability and impact.

 
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