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Some best practices for financial health

Over the years, I’ve had the privilege of working with dozens of organizations with a variety of practices. Through this, I’ve made some observations of what kinds of practices work well to maintain and develop the financial health and accountability practices of an organization. It takes a system of practices, some of which are very simple, to maintain your stated value

s.

1. Value collaboration? Create a finance team. Depending on the size of your organization, this could be paid staff, volunteers or a combination of both. This is a group of people committed to reviewing the financial reports, asking questions, and navigating the financial implications of organizational decisions. This does not mean it should be a group of only financial professionals – look for people who are trustworthy, willing, ask good questions and are detail-oriented.


2. Value consistency? Develop solid rhythms with deadlines. It’s one thing to have policies, procedures and standards of practice. But how is there verification that those are being practiced? The strongest organizations I’ve observed have defined rhythms. For example a finance team that meets consistently on the 2nd Thursday of each month. Or a clearly defined set of reports that are sent to the board or elder team by the 15th of the fiscal quarter’s close. Or departments that receive transaction reports to review monthly for questions or errors. These rhythms provide concrete practices to follow through with policies, procedures and values.


3. Value division of responsibility? Have clear areas of responsibility. When a staff or volunteer has a clear, appropriately measured area of responsibility for which he or she is responsible, everyone’s job becomes easier. For a larger organization, this could take the form of department heads who review budget reports for the line items they are responsible for. Or one member of the finance team who reviews the bank statements monthly. When managing finances is spread out in a way that’s manageable you not only avoid piling it on one person, you increase accountability and strengthen the transparency of your financials. This also increases knowledge of the regular workings of the organization which comes in handy during budget development season.


4. Value transparency? Create reports that are clear and foster an atmosphere of openness to questions. Finance people have a tendency to love spreadsheets. But the most comprehensive spreadsheet is pretty useless if it isn’t clearly connected to a story. Develop reports that clearly tell the story of where things are and where things are going. Income statement/statement of activity/profit and loss? Balance sheet/statement of financial position? Very helpful when augmented by a one-page summary that summarizes the key metrics. Possibly compares them to years previous. Do graphs work better for your team? Additionally, foster an atmosphere of openness to questions. Staff, volunteers and board members should be able to develop a basic understanding of how money is flowing in an out and that takes time and the freedom to ask questions.


The key is to find regular and consistent rhythms in which a team of people share knowledge and understanding of financial processes and health. This goes a long way to maintaining the integrity and sustainability of your organization.

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