NonprofitMBA Podcast 1.3: Why forecasting is so important to nonprofits
Summary: Today, what we are going to be talking about is why forecasting is so important to nonprofits. It’s an area that Raj has direct experience in and when I asked Raj what was one of the top things his firm talks to nonprofit clients about implementing he said forecasting
Why Forecasting is so Important to Nonprofits
- When his firm comes in to help nonprofits 99% of the time there is no forecasting being done
- When there is forecasting, it is pie in the sky and usually not updated
- Nonprofits often get line of credit to help with payroll but they wait to the last minute
- Forecasting helps you know if you will need a line of credit to help
- You want to get as many of your unknowns, known
- Forecasting allows you to not get caught by surprise
- Executive Directors are so focused on operations that they lose sight of financing
- After Executive Directors have been burned they are willing to do forecasting
- Raj’s firm will look at everything at the nonprofit to figure out what is going right and what needs to be improved
- Does the nonprofit understand what money is coming in and when
- What are the variable versus fixed costs
- Executive Directors often feel better about doing forecasting later because they want to be in control but the trick is updating the forecast
- Determining what funds have a probability of coming in is important part of the process
- Bookkeeper, accountant, and Executives should be involved in forecasting
- Layout everything on your calendar when funds and expenses are coming in, update it monthly
- Not a big fan of updating budget a lot because that means the forecasting wasn’t accurate, to begin with
- Really get a clear understanding in your mind of when funding and big expenses will be coming in and all the details behind it
- There is no forecasting module in QuickBooks but you can put forecast into QuickBooks as a budget
- Restricted versus unrestricted funds are very important to understand
Other Nonprofit MBA podcasts:
About the Guest Raj Thakkar, FOREsight Financial Services for Good & The Charter School Business Management (CSBM)
Raj is the Founder & CEO of two social enterprises, FOREsight Financial Services for Good and The Charter School Business Management (CSBM), which collectively serve 150 nonprofits to responsibly manage the accounting for over $700 million in public funds. He is considered a national expert on nonprofit and charter school finance and has trained leaders on financial best practices in 25 states. As an Adjunct Professor at NYU’s Wagner School of Public Service, he teaches Understanding Social Enterprise.
About The Host Stephen Halasnik, Financing Solutions
Stephen Halasnik is the host of the popular, The Nonprofit MBA Podcast. The Nonprofit MBA podcast’s purpose is to help nonprofit leaders. Mr. Halasnik is the Co-founder and Managing Partner of Financing Solutions. Financing Solutions is a leading provider of Lines of Credit to nonprofits and small businesses.
Mr. Halasnik is a graduate of Rutgers University and has an Executive Masters from the MIT Birthing of Giants Entrepreneurship program. Mr. Halasnik is a best selling Amazon author and is considered a leading authority on building great, purpose-driven businesses. Mr. Halasnik lives in New Jersey with his best friend, his wife Gina. Mr. Halasnik’s number one purpose is raising his two boys, Michael and Maxwell, to be good men.
About Financing Solutions Nonprofit Line of Credit
Financing Solutions nonprofit financing product is a great alternative to a traditional bank line of credit because it costs nothing to set up, nothing until used, and when used, is inexpensive. The credit line requires no collateral and no personal guarantees.
Nonprofit Organizations use their line of credit to help with emergencies or opportunities when cash flow is temporarily down (i.e. Payroll funding)
Please feel free to fill out the no-obligation, 2-minute nonprofit line of credit application here. The time to set up a credit line is when you don’t need it so that it is ready to be used, just in case.
Note: Financing Solutions donates 10% of its profits to various nonprofit charities