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Financial Management & Budgeting for NGOs

Assignment #4

Imad Shmaitilli

on 20 April 2015

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Transcript of Financial Management & Budgeting for NGOs

Financial Management
& Budgeting for NGOs

an Income for an organization is the cash flow in, which might be fixed like fees of membership, or variable like donations.

Membership Fees
Projects Profit
an Outcome for an organization is the cash flow out, which might be fixed like rental and allowances, or variable like electricity bills and such.

Sample of Cash Flow Forecast
Improved Version 3.0
Sample 2, Including
Actual Cash Flow
Cash Chart Projection [4.A]

by Imad Al-Shmaitilli

A Cash Chart projection helps the NGO keep track of its Financial Progress on a monthly basis. When revised periodically, the Cash Chart is able to straighten the deviation taking place.

Most NGOs are not self sustainable, hence they rely on a fixed income, whether a donation or reserve by its founder. Profit in this case is not tangible, hence it's for the organization's higher management to decide whether the money invested are properly dealt with or not.

The task of the finance department meanwhile, is to make sure the project managers are not crossing the boarders of their budget.
Cash Chart may Look Like this !
Drawback of Sample 1
Sample 1 is the most used in many NGOs, despite showing clear forecast of the coming months, this format when revised periodically, hardly provides the accountant with information over where the deviation or variance took place.

To improve this sample, there should be added "Actual" for later observance over the forecast cash flow.

The format will become as follow
Benefits of Sample 2
The forecast which is done at the beginning of the Financial year, helps you foresee when you might need to increase your donations or decrease your expenditures.

However, the Actual data, when entered, will help the accountant and the project manager to analyze where their expectations went wrong whether positively, or even negatively. They're able to adapt it if noticed quickly.

The final format will look as follow
Calculating the Net
1. Calculate Total Income
2. Calculate Total Outcome

Simple Math
Total Income - Total Outcome = Net

if Net > 0 ... You're on the Safe Side
if Net < 0 ... You've got to do Something

having Net = 0, is either by chance or based on exact pre-calculations !
Types of Budgets
There are three main types of budget:

o The Income and Expenditure Budget
o The Capital Budget
o The Cash flow Forecast.

What we are going to discuss throughout this presentation, is the Cash flow chart, which will be done on a yearly basis, divided into twelve months.
Improved Version
As mentioned before, the cash flow forecast will help the NGO foresee when extra income or outcome are needed.

However, for more professional performance, and strategy adaptation, it's required to add actual data to the sheet for regular follow up.

This will decrease the margin of error during the next foreseeing session.
A Budget tells your Money where to go;
otherwise, you'll wonder where it went !
If you're not sure where you're going;
Then for sure you'll end somewhere else !
If you Fail to Plan, you're Planning to Fail
Full transcript