Charities: Questions to ask when preparing a financial plan

As a charity, it’s in your best interest to act in the interest of your company and beneficiaries. You are also expected to protect and safeguard your assets and to act with reasonable skill and care.

In order to achieve this as a charity, you must identify the critical issues you face, alongside your purpose and plans you have in place to meet your goals. It’s worth noting that these will also depend on the size and type of your charity and the activities you offer. Let’s break down the questions you should be asking when developing a financial strategy for your charity and why they matter.

What questions to ask when preparing a financial plan

Here are some key questions you must consider when creating your charity’s financial strategy:

Where are the majority of your funds coming from?

Understanding where your funding is coming from will allow you to create projections for the future and see if there are any opportunities for improvement.

How profitable were you as a charity in the last financial year?

Information from previous activities can inform your future financial strategy, as you can identify strengths and weaknesses.

How profitable are your funds projected to be in the next financial year?

Creating projections can demonstrate where your financial strategy has room for improvement, in case you don’t believe you will be able to reach your financial targets.

What effect has the economic crisis had on your funds?

With all the recent changes, it is important to consider how the political, economic, social, and new technological environment has impacted your funds and if there are any changes you can make to combat any potential issues that might arise.

What goals do you want to achieve as an organisation in the coming year?

Understanding your goals is key to any strategy, as otherwise you won’t understand what to focus on.

Making the most of your finances and other factors

After this plan, you should have a good idea if your business is strong enough financially to provide services for your beneficiaries. Take some additional time to review your charity’s finances, cash flow and if any debts are up to date. These also include any changes to recent management accounts, cash flow details, closing bank balances and comparisons of budget to actual figures. Also consider other factors that might influence your supporters, as reputational issues and charity policies can affect the support of its donors, for instance the methods of how charities invest their money or the way they fundraise.