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How to create projections to achieve your goals

by with No Comment Featured BlogFinancial ManagementNonprofit

My daughter starts her second year of preschool this week. It’s hard to believe the summer has come and gone, and now it’s time to make sure I have adequate school snacks on hand at all times. I hope you had a glorious summer too. Even if you don’t have kids, there’s something in the air that changes when the calendar ticks over to September. Yes, it’s getting cooler but it also feels different, like the world is getting back to business.

Many leaders I know are gearing up for Q4. Our retail clients have their biggest sales months, our nonprofits are in the thick of fundraising, and everyone is putting in a 110% effort to meet their 2019 goals. Does this sound like you?

One thing that I’ve found super helpful as we enter this busy season is mapping out exactly how we’re going to achieve our goals, or forecasting.

You probably (hopefully?) created a budget in the beginning of this year that mapped out revenue and expenses from January through December, but that was a LONG time ago. Likely, you didn’t meet every single budget number for every single month, so forecasting is an opportunity to redo the upcoming months. You have a whole nine months and lots of information under your belt to make even better projections for Q4.

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So here’s how to create Q4 projections. Open your budget template (Need one? Grab mine!), your financials for the year, and all your hopes and dreams, and let’s dive in!

How to create Q4 projections:

  1. Look back. Review your financials for the year so far. Compare revenue and expenses to your budget. How did you do? How far off were you and why?
  2. Look back even further. Check out your Q4 financials for last year. That’s often a decent place to start to help anticipate what this Q4 might look like.
  3. Build your projections! And I seriously mean build. Start from the bottom up and create your forecast with building blocks. For my service businesses: How many clients do/will you have? How much do you charge per client/project? How many new clients will you get? For my product businesses: How much did you sell last year? How much new product have you purchased and what are your prices? What’s your advertising budget? For my nonprofits: How much did you raise last year? What big grants or major gifts do you have in the pipeline?
  4. Don’t forget expenses. Often we’re just thinking about the finish line in terms of revenue, but net income or profit (revenue – expenses) is really what we should be aiming for. Build in any and all expenses that you’ll have in Q4 and check out your net income. (Quick reminder to nonprofits: you can have a positive net income even though you’re a nonprofit! That’s how you build a cash reserve and long-term sustainability!)

For my friends out there who hate numbers, this can seem like a useless exercise (But I already created a budget!) BUT it’s truly the only way to stay on top of your goals during what is often the last season of hustle for the year. AND, if you create this forecast now with a clear path of building blocks to achieving your goal, maybe it won’t feel like such a hustle after all.

Stephanie

PS – Feeling a little overwhelmed? I have a template, complete with a video walkthrough, here! Download it for free and get started.

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Do we need an audit?

by with No Comment AuditFeatured BlogNonprofit

I hope everyone had a restful weekend! Are you December-31st-close people finishing up year-end? More importantly, is everyone sticking to their resolutions? I’m proud to say that I’ve gone to yoga once a week! It’s amazing how much better I stick to something when I simply put it in my calendar and treat it as I would a doctor’s appointment. Non-negotiable, not cancellable, not available for anything else during this time. Let’s keep it up!

We talked last week about how to prep for an audit and I’m here this morning to talk about those organizations who are in the initial phases of growth (less than $1M) and haven’t yet had an audit. They’re not sure if they need an audit and once they decide they do, they have no idea how to find the right auditor.

Let’s tackle this head on!

First, what is an audit? Is it when the big, scary IRS comes in and rifles through all your files and you’re in trouble? No way! This is when you choose an independent auditor to come in and assess not only your books but also your policies and internal controls, then they hand you a neatly comprised set of financials that you can then share with donors, funders and other stakeholders. Also, you pay them.

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Now that we’ve got that cleared up, does my organization really need an independent auditor? There are a few factors to consider here:

What state are you incorporated/registered in? Each state has different audit requirements. Are you registered in any other states? Oftentimes, organizations will register in a number of states in order to fundraise there and those states may require audited financials. Here is a great guide of state-by-state audit requirements and links to statutes. [Please always consult your legal counsel before making any decisions – sites like this could be outdated!]

Who are your funders? Many private foundations and government agencies will require audited financials along with grant or contract applications. If they don’t require an up-front audit, they may require one when you spend above a certain threshold of federal funds in a year (currently $750,000).

The IRS requires nonprofits to complete the 990 but does not require an independent audit. Part XII Financial Statements and Reporting of the 990 asks whether or not the organization has had an independent audit and, as you probably know, this form is public information.

In short, even if your organization manages to squeak by without technically needing an audit, it is certainly a best practice because:

  • You’ll gain the credibility and confidence of funders and promote financial transparency of the organization.
  • Your organization will potentially be eligible for new and different sources of funding as well as ratings by the important charity watchdog organizations (Charity Navigator, Guidestar, etc).
  • Finally, and maybe most importantly, it’s an opportunity to do a deep dive into your policies and procedures to ensure you’re using your limited resources most efficiently.

Here at 100 Degrees Consulting, we are all about BEST PRACTICES!

Come back tomorrow for the second installment of this thrilling series: Okay, let’s do it. Now how do I find an auditor?