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  • Five ways high quality cashflow
    forecasts can benefit your charity
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Article:

Five ways high quality cashflow forecasts can benefit your charity

17 August 2020

Charities, more than any other sector, have faced the pinch from COVID-19. The tension between an increase in demand for their services at a time when income is strained from cancelled events and fundraising opportunities, from public funds being diverted and as costs increase from impacting new legislation, is palpable. High quality charity cashflow forecasts and scenarios are essential to protect charitable activities and are invaluable in prioritising resources.

Below we outline the five ways they could make a real difference to your charity, and provide a short demo of our unique forecasting tool that can help improve your forecasting.

1. Strengthening internal alignment

2. Building resilience

3. Increasing understanding

4. Evidence of sound management processes

5. Supporting managed closure

CASH FLOW FORECASTING TOOL DEMO

1. Strengthening internal management alignment

In some charities, the planning process can be relatively ad hoc with individual managers having differing priorities and making their own assumptions. As charities change activities and manage finite resources, a well-defined approach to forecasting, involving key stakeholders, allows activities to be aligned and prioritised to maximise impact. A robust process engages internal teams to help them understand decisions being made, and consider alternatives.

2. Building resilience

We live in uncertain times politically, economically and environmentally. Scenarios enable charities to consider uncertain outcomes and prepare for future events, enabling them to adapt quicker and in a more measured way. For example, prolonged social distancing or changes to social behaviours can be considered and identifying where future investment or resources may be needed. Forecasts can be adjusted for new assumptions to identify potential cashflow pressure points – a form of risk management that helps to make the charity more resilient.

3. Increasing understanding

Preparing a forecast helps management identify detailed costs, assess project performance and capture key assumptions and cost drivers. These can then be monitored and controlled to increase impact, avoid unnecessary costs, prioritise initiatives and/or manage underlying risks. Linking these to ongoing monitoring through key performance indicators (KPIs) will help charities act quicker when events take place or if problems arise.  For example, one organisation we worked with was able to revisit historic costs, which were less relevant in light of new ways of working, and freed up much needed resource. Another realised they had no understanding of the underlying performance of one division.

4. Generating evidence of sound management processes

Generating timely, effective cashflow forecasts doesn’t only help management teams run the organisation, but also builds up a track record of sound processes being applied. This allows trustees and stakeholders to monitor effectively. It can protect executive teams making tough decisions quickly and justify their rationale at the time.  Good governance protects the decision makers, as well as the organisation.

5. Supporting a managed closure

Not every organisation or division will be in growth mode. Some management teams may be looking to close down all or part of their operations in response to changes to needs. In addition, charities need to take additional measures if their reserves fall below their policy. If they want to close activities on their own terms, then it’s important to think through details such as what assets might be liquidated and the cost of any redundancies.  Identifying these issues early allows a managed process and delivers the best outcomes to all involved.

Improve your cashflow forecasting today

Cashflow forecasting is a vital component of good governance and charity planning – and plays a key role in providing management teams with insight into future issues that might arise. It’s clear to see that there are huge benefits of forecasting, particularly if done well and regularly. Taking advice and having an objective view from experts who can review your forecasts through an external stakeholder lens can add real value and contribute to your commercial objectives. Combined with the latest finance and accounting technology, this approach can make a real difference to your charity.

We have developed a unique way of forecasting which allows charities to build and model their own forecasts, ensuring they take ownership and understand the key drivers. The approach also builds a three way forecast (cash flow, income and expenditure and balance sheet) and enables side-by-side comparison of different scenarios, so you can decide the best strategy for your charity in uncertain times.

With this tool, charities can control their forecasts themselves for a much cheaper, monthly licence fee. Our advisers will set you up with the tool, talking you through how to use it and apply it to your own circumstances.

The tool is then at your disposal for the rest of the year, with our charity expert advisors on hand to help with any questions.

To find out more about our cashflow forecasting tool, view the demo below.

If you would like to discuss any of these issues or would like to discuss utilising this unique tool for your charity’s forecasting, please contact us.