M+M 008: Moving From Reactive to Proactive

You’ve got your financial operations in place.

You’ve tightened up your internal controls.

You’re staying compliant.

Those are the foundation for what comes next.

It’s like having floors, drywall and a roof in a new home. It’s not going to stand out against the next house, but you’ll be glad you have it in place.

What’s next, planning + reporting, is like deciding where all the fun stuff in the house goes. It’s the stuff that takes a house and makes it a home.

It’s the stuff that makes organizations go from always putting out fires to being able to leverage their financial information to drive their mission forward.  

It’s time to stop reacting and start planning.

Too often, leaders spend their energy chasing numbers from the past. Great financial leadership isn’t just about knowing where you’ve been, it’s about having confidence in where you’re going.

That’s where financial planning comes in.

These are the kind of tools you put in place to help the Executive Director or CEO sleep better at night. 

They help guide decisions and push you to dream about the future. 

Your Strategic Plan Shouldn’t Collect Dust

Planning starts at the highest level. If your organization has a strategic plan, every financial decision should align with it.

That’s something that you spent hours and probably an offsite or two coming up with. You might have even brought in an outside voice to speak into it.

If you truly believe what you put in the strategic plan then it needs to be used as a guide for your organization.

It’s what your budget, short-term goals and forecasts should be anchored into. Those are tools that help you reach the goals you laid out in the strategic plan.

If your mission is growing, does your financial plan support growth?

If your board wants sustainability, are you planning for reserves?

If you want to launch a new program next year, is that accounted for in the numbers?

A good strategic plan should have a financial planning element to it. This should be used as the base for your budget + forecast.

Budgets Actually Do Have a Purpose…

Most nonprofits create a budget because they “have to.”

It gets submitted to the board, approved in a meeting, and often ignored by the end of March.

Trust me, I’ve seen it in organizations. “Ah, we’re already off vs. our budget so who cares”

But your budget can do so much more than satisfy a requirement.

Here’s how to make a budget work for your organization.

• Annual Goals: Remember that strategic plan? Use whatever year you are in that plan as your starting point for the budget. If you’re growing your programs are you funding it through reserves or new revenue? How much extra headcount do you need? Anchor it to the strategic plan. It makes the budgeting process a lot easier and it forces alignment with your long-term vision. 

  
  

• Cash Projection: Every budget should include, at minimum, a cash flow component. You may not have a full blown balance sheet, but are you projecting cash each month? (Bonus points if you project unrestricted and restricted cash each month). No budget is complete without looking at cash. Budgeting for cash might reveal low points that could put pressure on the organization that you might have otherwise missed.

• Team Input: When your budget is tied to your strategic plan it allows for you to use it as a tool to integrate the vision for the organization at deeper levels. By starting with “here’s where we want to get to in the next year” and having your team come up with ideas on how to get there it will create more buy-in. Will every idea find its way into the budget? Probably not, but some will and they’ll probably be pretty great ideas! 

• Tell The Story: Many grants ask for a “budget narrative”. In simple English…take the budget, remove the #s and tell me what this means in words. Every organization should do this because it will help you articulate what the budget is trying to accomplish. When it tells a story, it’s more than a check the box exercise.

If your budget is sitting in a spreadsheet without being referenced again, you’re missing its real value. Over the next couple of weeks, we’ll talk about how to incorporate it into your reporting so that it’s helpful all throughout the year.

Your Forecast Will Help You Sleep Better At Night

One of the most meaningful compliments I’ve ever received was from a startup CEO who said:

“You help me sleep better at night.”

We were doing close to $7m in annual revenue, but we were on pace to spend even more than that.

No forecast in place that I knew of…

I built a tool that allowed the leadership team to send me an email with any scenario that impacted the major levers of the business.

I could usually update it in a few minutes and out popped cash flow by month for the next 12 months.

Out of all the financial tools I’ve used with nonprofits, cash flow forecasting is the one that consistently changes how leaders operate.

It’s not about being perfect, but it creates a living, breathing tool that lets you see around corners.

It’s hard to run an organization in today’s world. We make it harder when we don’t have tools in place to help us see in the dark.

I mean…can you imagine not having the iPhone flashlight feature now?!

Here’s what a strong cash forecast can help you do:

• Scenario Plan: What happens if your biggest donor cuts back by 50%? Or if you exceed your fundraising goal by 20%? Maybe you want to hire that rockstar Development Director. A forecast helps you model different paths and prepare accordingly. The worriers out there can plan for doomsday and the optimists can plan what they’ll do with all that extra money they’re going to fundraise this year. 

• Board + Funders: A forecast is a powerful tool to instill confidence with your board and funders. It shows you’re thinking ahead and focused on sustainability, not just surviving the day-to-day. Trust always comes before dollars. Are you trusting the organization who comes to you as a donor with a plan for the next year backed by numbers or one who’s doing it off of vibes?

• Stress Reduction: I’ve never seen another tool reduce leadership anxiety more than this one. It replaces the unknown with a roadmap, even if the road still has bumps. I’ve been on Zoom calls time and time again when I show the forecast for the first time. Even if it’s bad information, there’s relief because there’s clarity. It’s like lifting a little bit of fog on all of those decisions you’ll end up making today, this week, this month and this year. Every little bit of clarity helps.

If you only adopt one new planning tool this year make it a 12-month rolling cash forecast.

If you don’t believe me, email me (stephen@moneypathfpa.com) and I’ll personally connect you with another leader who can vouch for the power of a forecast.

Why It Matters

Planning brings clarity.

✅ It gives your board better insight.

✅ It helps your team align around shared goals.

✅ It makes your finances easier to manage. 

If you’ve already handled your operations, controls, and compliance, planning is the next piece of the puzzle.

It turns your financial function from a support role into a leadership tool.

What’s Next

Next week, we’ll dig into some simple analysis you can do with your financial data. Not just for fun with spreadsheets, but for real impact to your organization. One of the things I’ll share helped an organization save over $30k in annual spending they didn’t even know was happening.

For now, take 15 minutes to ask yourself:

• Is our budget tied to real strategy?

• Do we look at our cash flow beyond this month?

• Are we making decisions based on data or gut instinct?

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