In order to ensure proper financial management and use of funds the support institution has to install a simple but accurate accounting and financial reporting system from day one of its operation. Therefore, the foundation team needs to prepare the accounting and reporting system of the institution.
Financial forecasting or planning occurs as early as in the business planning stage. In the chapter about creating financial plans the guide presented how to do a budget, cash budget and balance sheet forecast. These forecasts need to be reviewed regularly and controlled against actual figures. The institution management will then analyse any deviations from the original forecasts. These evaluations will improve your understanding of your business environment and conditions, e.g., payment terms, sales lead times, funding conditions. Furthermore, the analysis will identify areas where corrective actions need to be taken, e.g. shortening of our payment terms in order to receive client payments earlier.
A third important aspect of financial management is auditing & reviewing the accuracy and correctness of the reporting and accounting system.
Tip 3 Importance of proper accounting and financial management
Incorrect or inaccurate accounting and reporting endangers the existence of the support institution and its management!
The institution has to annually disclose financial management information to its members and donors. In many cases a formal audit will be demanded. Any indications of incorrect accounting or improper financial management are badly perceived by clients and supporters. Your institution can lose its good reputation and credibility within a few days.