Following the Nonprofit Accounting and Financial Management Year - November/December 2013
Planning for the Year-End - Part II - An Operational Review
Our first newsletter started our discussion about preparing for the year-end and the new year. We continue that theme with some of the steps you can take and potential benefits of performing a year-end operational review. It's a good time to review how the year has gone, identify areas for improvement to address next year, and even include in the 2014 budget.
You can find our first newsletter on Facebook at www.facebook.com/BarringtonWrightAssociates. In it, we discuss Planning for the Year-End, Ending 2013 on a Good Note, and Budgeting for 2014.
You probably already have a list of ideas for areas to improve next year. To get additional ideas, help validate and fine-tune your list, a good place to start is with your audit/financial review. Sometimes prioritizing your ideas can be the difficult part. And, how to approach implementing them. We'll review each of these next.
Start with Your Latest Audit or Financial Review
How did your audit or review go? If it didn't go well, did it start late, and take too long to complete? Where the results what you expected? Will it have any impact on your funding?
Some of these problems may be smaller and easily corrected, others, larger and more urgent. As a first step, you can separate the problems into those that may immediately impact funding and finances, from those that indicate where operational improvements are needed.
Fixing the problems that impact funding and finances, are areas you should address immediately. You may find that you have problems within your finance and accounting department - insufficient staff levels or expertise, or outdated processes and systems. Likely they are coupled with bigger issues, like a mismatch between revenue and expenses, and specific program funding.
If your audit went well or identified areas for improvement that are important to implement, but not urgent in nature, discuss them with your auditor, and other ideas your auditor may have to make improvements.
Identify Additional Areas for Improvement
During the year you're on the lookout for ways that can impact funding in a positive way, improve the effectiveness of your programs and new initiatives, leverage spending on these areas, and make administration more efficient or less costly. It naturally follows to use the same approach looking for operational improvements.
A good starting point is to review the basics. Are you doing all the things well that you should be doing well? Is your accounting, invoicing, bill payment, and reporting timely each month? Is everyone happy with the service levels you provide, and how their transactions are processed? Are you providing the information, analysis, higher value insight, and innovative solutions that people need? Internal and external to the organization?
Look at the balance between time spent processing transactions, services provided, month-end work, review and analysis, and supporting the information needs of the organization. Is the balance of time spent on each category of transactions and reporting appropriate for the revenue and expense amounts involved? You'll need to take into account regulatory and contract requirements, review those as well.
Do you have transaction intensive processes that could be redesigned and/or automated to a greater level then they currently are?
How integrated and automated is the flow of transactions and information between your program and fundraising systems, general ledger, and reporting and visualization tools? Are you using web-based sites to help manage fundraising campaigns and process donations, and credit card transactions? Are you doing the same for program services, contract and grant payments and reporting, with funders and program service providers, where possible?
Set Your Priorities
The first priorities will be those required by your audit or that impact your funding.
Then you may want to look at them as we discussed above. How will they will help your program and development staff impact funding in a positive way, improve the effectiveness of your programs and new initiatives, leverage spending on these areas, and make administration more efficient, or less costly?
Develop a plan of attack.
Review the processes you're currently using and the environment you'll be operating in, check the resources you can leverage, see where you can make better use of existing and new technologies. Also, check out what other organizations and the business world are doing with similar problems
Make a reality check.
Review the time and expertise your staff has available to make improvements - ongoing incremental improvements and periodic larger ones. Which ones can be done incrementally, and which will need to be larger projects?
Look at the cost benefit trade-offs for each.
Where automation and integration doesn't seem cost effective or appears too daunting, start with incremental steps. Frequently, incremental steps can bring a good part of the benefit at far lower cost. Sometimes, those initial steps will lead to solutions to tackle the whole problem down the road.
Wrapping Up Your Planning
Talk with your peers in other organizations, and join organizations of your peers. These are good ways to learn and identify possible solutions and approaches to implement your projects. Involving your staff in the review and planning will help set the stage for the upcoming year. As will steps to build a culture of making ongoing incremental improvements. We'll provide more discussion and detailed check lists for the topics above during the upcoming year. Best of luck with your projects.
In our next issue we'll wrap up our Planning for the Year-End discussion. Look for our year-end issue in a few weeks.
Thank you for taking the time to read our newsletter. We welcome your feedback. Please contact Nicole email@example.com or Tom firstname.lastname@example.org to give us your thoughts.
Nicole Wright and Tom Ball