Financial Management and Fundraising

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In most cases, the executive director is also responsible for determining how the organization spends its money and generates financial support. Managing and raising funds effectively is critical to the sustainability of the organization and will be an issue of particular concern to the board of directors. In this chapter, you will discover how to generate and analyze key financial documents to keep track of your nonprofit’s finances, and how to create a fundraising plan so you can successfully raise the funds needed for your annual budget.

At a minimum, a new executive director must have a facility with managing finances.

Balance Sheet
Also known as a “statement of financial position,” the balance sheet reports on the organization’s assets and liabilities for a given moment in time. Assets include cash, accounts receivable, equipment, ownership of a building, and any intangible resources that have value, such as a curriculum or copyright. Liabilities are any cash owed, including payroll, rent, transportation, and supplies.

Statement of Activities
This statement of profit and loss compares funding sources against program’s expenses, administrative costs, and other operating commitments. As opposed to the balance sheet’s financial snapshot, the statement of activities reports on a specific timeframe (e.g., monthly) and indicates whether the organization is financially solvent (in the black) or owes money (in the red) for that period. The executive director is also responsible for working with the board, accountant, chief financial officer, and other stakeholders in creating the organization’s annual budget.

The executive director is typically tasked with creating and implementing a fundraising plan.

In tandem with a development director, board members, or other support staff, the executive director is typically tasked with creating and implementing a plan for successfully raising the funds needed per the annual budget.

When creating a fundraising plan, it is important to examine the organization’s history to identify previous funding sources. This is the single greatest indicator of future fundraising success. The fundraising plan should outline steps for raising funds from each potential source. Using foundations as a sample revenue source, here are some suggested steps for creating your fundraising plan:

  1. Review all previous foundation funding and determine whether the organization is eligible for financial support from each foundation again.
  2. Research additional foundations for compatibility with the organization in terms of mission, geographic focus, and organizational life cycle.
  3. Complete profiles that include foundation priorities, contact information, proposal due dates, submission instructions, and funding range.
  4. Develop a funding matrix to determine the probability of receiving grants from each foundation. Criteria include compatibility with organizational mission, foundation funding priorities, receipt of previous funding, funding of similar organizations in the area, and relationship with the funder.
  5. Multiply the probability of funding by the amount of the request to determine how much the proposal is “worth.”
  6. Determine which foundations to apply to based on “worth.”

The steps above can be adapted for planning to raise funds from individual donors, corporations, and government entities. Once you determine who you will be seeking funding from, you will need to establish a plan and time frame for requesting the funding.

Develop a funding matrix to determine your anticipated revenue from each source.

Download this Funding Matrix to help track the amount of funds you expect to receive from your funding sources.

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