Professional Documents
Culture Documents
Accounting
John Walker
Basic Accounting
Balance Sheet
Income Statement
Basic Finance & Accounting Chart of Accounts
Budgeting
Key Principles
Methodology
Recommendations
John Walker Cashflow
Management
Principles & Tools
Echoing Green Methodology
Targets
New Fellows’ Conference Non-Profit
Essentials
Setting Up
Restricted Funds
The Board
social change
starts here
Basic Finance &
Table of contents Accounting
John Walker
Methodology Cashflow
Recommendations Management
Principles & Tools
Methodology
Cashflow Management
Targets
Principles & Tools
Methodology Non-Profit
Essentials
Setting Up
Targets Restricted Funds
The Board
Non-Profit Essentials
Setting Up
Restricted Funds
The Board
Basic Finance &
Financial Statements Accounting
John Walker
Basic Accounting
◮ Balance Sheet Balance Sheet
◮ The resources you control at a point in time Income Statement
Chart of Accounts
Targets
The Board
John Walker
Basic Accounting
Balance Sheet
◮ Difference between Reliable and Relevant Income Statement
Chart of Accounts
◮ Reliable: concrete - cash is tangible, and we can verify
Budgeting
exact cash level Key Principles
Methodology
◮ Relevant: recognize the commitments made by the Recommendations
organization that will eventually involve cash e.g. Cashflow
Management
placing an order, or receiving a pledge commitment
Principles & Tools
Methodology
◮ Reliable = Cash , Relevant = Accrual
Targets
◮ In the initial stages, working on a cash basis is fine Non-Profit
Essentials
◮ Switching to accrual really depends upon creating scale Setting Up
in the following: Restricted Funds
The Board
◮ Incurring liabilities
◮ Prepaid expenses
◮ Building receivables
Basic Finance &
The Balance Sheet Accounting
John Walker
Basic Accounting
Balance Sheet
◮ What you own Income Statement
Chart of Accounts
◮ Assets Budgeting
◮ What you owe Key Principles
Methodology
◮ Liabilities (to Creditors) Recommendations
Cashflow
◮ Equity (to Shareholders) Management
Principles & Tools
◮ In a Non-Profit, the state owns the assets, and the term Methodology
Non-Profit
◮ Why use the term balance ? Essentials
Setting Up
The Board
Assets = Liabilities + NetAssets
◮ This is the fundamental basis for financial accounting
Basic Finance &
Balance Sheet Structure Accounting
John Walker
Basic Accounting
Assets Liabilities & Equity Balance Sheet
Income Statement
Budgeting
Cash & Equivalents Key Principles
Methodology
Stocks & Shares Recommendations
The Board
Σ of Assets Σ of Liabilities & Equity
John Walker
Basic Accounting
Revenues, what you earn Balance Sheet
Income Statement
Donations & Grants Chart of Accounts
Targets
Salaries & Benefits
Non-Profit
Rent & Office Essentials
Insurance Setting Up
Restricted Funds
Net Income
John Walker
Targets
◮ Seek to understand the true cost of each activity
Non-Profit
◮ Direct : e.g. program consultancy, event staffing Essentials
Setting Up
◮ Indirect : not specific to a single activity e.g. office Restricted Funds
John Walker
Basic Accounting
Balance Sheet
Income Statement
Chart of Accounts
◮ It’s just a table. . . really. Budgeting
◮ Generic expense accounts, the rows Key Principles
Methodology
Recommendations
◮ What was the expense
Cashflow
◮ e.g. airfare, meal, taxi, grant paid Management
Principles & Tools
◮ Program-based segments or divisions, the columns Methodology
John Walker
Budgeting
Indirect Expenses Key Principles
Salaries 30 45 ... 75 Methodology
Recommendations
Benefits 30 45 ... 75
Cashflow
Insurance 10 12 ... 22 Management
Direct Expenses Principles & Tools
Methodology
Consultancy 30 45 ... 75 Targets
Supplies 30 45 ... 75
Non-Profit
Travel 10 12 ... 22 Essentials
Meals 10 12 ... 22 Setting Up
Restricted Funds
Total 150 216 366 The Board
John Walker
Basic Accounting
#1: Planning is everything Balance Sheet
Income Statement
#2: The activity of planning itself is paramount Chart of Accounts
Budgeting
Key Principles
Planning & budgeting give you the essential understanding Methodology
Recommendations
of the organizations dynamics, enabling:
Cashflow
◮ you to build confidence what actions are the most Management
Principles & Tools
appropriate or beneficial - ties outcomes to tasks Methodology
Targets
◮ you to make decisions on-the-fly and better estimate the Non-Profit
resulting impacts - improved reactivity during change Essentials
Setting Up
◮ you to compare what you said would happen against Restricted Funds
The Board
what actually did
◮ people to see that you (look like you) know what you’re
doing and where you’re going
Basic Finance &
Basic Budgeting Workflow Accounting
John Walker
Basic Accounting
1. Strategic Goal Definition reassess goals
Balance Sheet
Income Statement
Chart of Accounts
Budgeting
C Key Principles
Methodology
Recommendations
Non-Profit
Essentials
3. Estimation & Costing A Setting Up
Restricted Funds
Indirect & The Board
direct expenses
B
4. Budget Aggregation
Suitable toolset. . .
Basic Finance &
Some Recommendations Accounting
John Walker
Basic Accounting
◮ Iteration is fundamental Balance Sheet
Income Statement
◮ You never get it right first-time Chart of Accounts
◮ Honing the answer builds understanding Budgeting
Key Principles
◮ Involve everyone Methodology
Recommendations
◮ Buy-in is essential Cashflow
◮ People need to agree they can achieve the outcomes Management
Principles & Tools
with the resources at their disposal Methodology
John Walker
Budgeting
◮ Cashflow mgmt is a mix of science and art Key Principles
Methodology
◮ But it does benefit from rigorous analysis and solid Recommendations
Cashflow
understanding of the economics of the organization Management
Principles & Tools
◮ Challenge #1: matching prudent estimation of Methodology
Non-Profit
◮ Challenge #2: knowing when to spend to make more Essentials
Setting Up
◮ Understanding the income pipeline is a critical factor Restricted Funds
John Walker
Budgeting
EndingCash(t−1) + ∆Cash(t) = EndingCash(t) Key Principles
Methodology
Recommendations
John Walker
Basic Accounting
◮ Targets are a critical management tool Balance Sheet
Income Statement
◮ Focus efforts on meeting your plan; they are the tactics Chart of Accounts
Cashflow
◮ Defining a small set of good, simple targets is a very Management
Principles & Tools
important step Methodology
Non-Profit
◮ Secure $100k by mid-year & $250k by year-end Essentials
◮ Caution: know the difference between revenue vs cash Setting Up
Restricted Funds
◮ E.g. Cash coverage: The Board
◮ Minimum 3 months cash in hand
◮ Number of months depends on dynamics. . .
◮ Targets offer the opportunity to reward your workforce
Basic Finance &
NFPs: General Recommendations Accounting
John Walker
Basic Accounting
◮ Track the specific segments: Balance Sheet
Income Statement
Budgeting
subprograms as necessary Key Principles
2. Development: Fundraising & donor cultivation Methodology
Recommendations
3. Administration: True overhead and general Cashflow
management Management
Principles & Tools
◮ Develop a pledge recognition process; manage the Methodology
Targets
pledge receivables
Non-Profit
◮ Implement a grant management process - monitor the Essentials
Setting Up
reports, especially if milestone payments are report Restricted Funds
John Walker
Basic Accounting
◮ Restricted funds: tied to specific expenses Balance Sheet
Income Statement
◮ direct, itemized costs Chart of Accounts
Budgeting
◮ proportional allocation e.g. from salaries Key Principles
◮ How do you know? Pledge/gift provided with restrictive Methodology
Recommendations
language. . . Cashflow
Management
◮ Check with accountant/auditor if it appears vague Principles & Tools
Methodology
◮ Find donors that understand the necessity of overhead Targets
◮ Build in an overhead cost coverage into your grant Non-Profit
applications wherever possible Essentials
Setting Up
◮ using a fixed percentage is usually acceptable, say 10% Restricted Funds
The Board
◮ Write-up a process for how you handle the
income/expense side of restricted funding - benefits you
in the long-run
Basic Finance &
Recommendations with Boards Accounting
John Walker
Basic Accounting
Balance Sheet
◮ A board is there to help you make financial decisions - Income Statement
Chart of Accounts
use it accordingly Budgeting
Key Principles
◮ Deliver financial data, in advance of the meetings and Methodology
Recommendations
in an easy-to-read format
Cashflow
◮ Focus the data presentation on the salient issues you Management
Principles & Tools
need to discuss Methodology
Targets
◮ Identify the financial guru - seek their involvement and Non-Profit
buy-in prior to meetings Essentials
Setting Up
◮ Typical, basic board pack: Restricted Funds
The Board
1. Historicals: income/expense, balance sheets (asset list)
2. Projections: revenue and expense, cashflow
3. Specifics; notes