NLC-Upspring - Budgeting_for_Project_Performance final

Transcription

Budgeting for Project Performance
Drew Tulchin
Upspring
May 26, 2016
www.NativeLearningCenter.com
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Course Description
This webinar is applicable to all Tribal housing authorities, Tribal government
agencies, NGOs and affiliated entities. It is geared towards beginners.
Do you need to be better at budgets and budgeting? Do the numbers escape
you? Do you need to do a business or strategic plan? Join us for this
introductory session on projections and budgets. Learn how to think ahead.
And, to manage numbers of planned versus actual activity.
Budgeting and financial projections are vital elements of managing Tribal
governments, Tribal organizations and Tribal businesses. This interactive
webinar will demonstrate why budgeting is important and show some howtos. The training will include how tos, tools/tricks, and online and other
resources. The training includes a detailed case study from an experienced
expert in the field.
Training Objectives
• Explore advantages of thinking ahead
• Comprehend beginning dimensions of budgeting
• Learn about financial planning tools such as comparative
analysis, metrics and prioritization, and explore the
elements involved in creating financial projections.
• Compare planned versus actual figures
• Case study from Indian Country
Have fun! Please ask questions at any time
Introduction
Poll Question #1:
Where are you from?
What organization(s) do you represent?
UpSpring - Consulting Firm, www.upspringassociates.com
Formerly Social Enterprise Associates
• Network of seasoned consultants for impact investment
and development helping businesses, organizations,
foundations and governments 'Do well by doing good"
• Certified HubZone Small Business
• ‘B Corporation’ in 2010, the first in New Mexico
• Honors:
2015, ‘14 & ‘11 “One of the Best for the World” Small Businesses
One of 119 companies from 20 countries
2012 NM Sustainable Business of the Year Honoree
Drew Tulchin, MBA, Managing Partner
16 years experience building start-ups and growing
organizations. Specializing in the 'triple bottom line,' focus is
market-driven business success that generates social,
community, and environmental value
Consulting experience with numerous Native American Tribes
and in 40+ countries from A (Afghanistan) to Z (Zambia)
Recent capital raises: Ohkay Owingeh Housing Authority in NM,
US MFI from the U.S. Dept. of Treasury, Koolkids in
Vietnam, Solar and Energy Loan Fund (SELF) in Florida,
and Sea2Table in NY
100+ publications and presentations on these topics
Consulting Examples, Native Clients
Northern Pueblos
Housing
Authority
White Mountain Apache
Tribe, Fort Apache Heritage
Foundation, Arizona
Ohkay Owingeh
Housing Authority
Shoshone-Bannock
Tribes, Fort Hall
Reservation, Idaho
Topics Overview
1. Importance of planning ahead
2. Budgeting fundamentals
3. Forecasting & financial projections
4. Using financial planning for projects
Every Business or Non-profit is Different
Ideas
Mission
Personnel
Timeline
Budget
Questions #2:
What would you like to know today
about budgeting?
Different Budgets
Operating: day to day activities of an organization
Program: activities of one program
Grant: activities supported by one grant
Cash flow: cash in and cash out
Capital: investment activities of the organization
Different Budgetary Timespans
Year: most common
Month: most precise, for organizations that close
monthly. Also commonly used for cash flow
Multi-year: for strategic planning
1. Importance of Planning Ahead
Importance of Planning Ahead
Challenges:
• Many tribal gov‘ts and tribal
entities are cash constrained
• Not all managers have formal
education or MBAs
• Few resources = little room for
mis-allocation
• Don’t always have clarity on
resources like grants to be
provided
Benefits:
• Match activities to resources =
better decision making
• Avoid exploding costs
• Convince more funders/donors
What’s the Solution?
How do we plan ahead?
2. Budgeting Fundamentals
Budgeting Fundamentals
What does BUDGETING mean?
• ANALYZING current financial situation
• FORECASTING revenue and expenses
GOAL: Matching
needs, resources,
and actions
Deﬁne
Goals&
Gather
Data
Adjust
Budgetor
Goals
Budge&ng
Process
Monitor
Outcomes
Reconcile
Goalsand
Data
Create
Budget
How? ! Financial Statements
What?
• Formal record of financial activities
• Show financial standing
• Easy to understand
Who?
• All organizations seeking external funding
• Not-for-profit and for-profit
Why?
• Manage finances
• Efficient resource allocation
• Show how capital is used
Questions #3:
What type(s) of financial statement do
you/your organization use on a regular basis?
Financial Statements Types:
Income
Statement
BalanceSheet
CashFlow
Statement
Types of Statements:
Income
Statement
• Performance over period: time, revenue, expenses
• Revenues - Costs = Net Income (Loss)
BalanceSheet
CashFlow
Statement
Example: Income Statement
Total expenses
= Income – Total expenses
Income
Statement
BalanceSheet
• What organization has, owes, owns
• A specific point in time
• Assets = Debt + Equity
CashFlow
Statement
Example: Balance Sheet
Income
Statement
BalanceSheet
CashFlow
Statement
• Changes in bal sheet and income state affect cash
• Beginning Cash Balance + Cash in – Cash out =
Ending Cash Balance - ss
Example: Cash Flow Statement
Cash flow activities
categorized in 3 separate
activities
3. Forecasting & Financial Projections
Questions #4:
How OFTEN do you use or reference
financial statements in your organization(s)?
Forecasting & Financial Projections
Important Questions:
1. How much money needed in year 1, 3, 5?
2. What happens if expenses 50% higher,
revenues 50% lower?
3. What are key sources of revenue, major costs?
4. When break-even, if ever?
1. Gather data on “Year Zero“
2. What do you know for sure? List that.
3. Make educated assumptions on future:
" " " " " Funding source/size: grants, where $ comes in
Revenue: # of units, # of ‚sales‘, price, market size
Personnel admin costs: salary, consultants, training
Facility & other expenses: rent, phone, etc.
Program expenses
Create Dynamic Financial Model
What?
Why?
• Budget that can change
• Model different assumptions
• Can change/adapt
• Changes over time with new info
• Helps responsible planning ! “What if” tool
Example of Projection Assumptions
Key Lessons for Assumptions and Forecasting:
" Use current data as baseline
" Determine strategy (aggressive vs conservative)
" Be “realistic“
Let‘s take a look at the Excel
Case Study:
Sean Winters, Executive Director
Chi Ishobak, Inc.
• • • • Pronounced Chee-ish-oh-bock – “Big Cabbage”
Certified Native CDFI through the CDFI Fund
Michigan 501c3 non-profit
Incorporated in 2009, provides financial services
for Pokagon Band citizens and enrolled members
of federally recognized Michigan Tribes
Chi Ishobak, Inc.
LoanPrograms
• Commercial
• Consumer
DevelopmentServices
• FinancialWellness
• IndividualDevelopmentAccounts(IDA)
• BusinessDevelopment*
Business Model Canvas
Commercial Success
Commercial Success
Consumer Success
Consumer Success
THANK YOU!
SEAN WINTERS
(269) 783-4157
[email protected]
WWW.CHIISHOBAK.ORG
4. Using Financial Planning for Projects
Using Financial Planning for Projects
Compara&ve
Analysis
Decision making
& prioritizing
Financial
Feasibility
Evaluating
Plannedvs.
Actual(Variance)
Comparing
StressTest/
Scenarios
Using
Compara&ve
Analysis
Why use it
To place 1 or more options side by side based on
same factors
Process
1. Take universe of everything and choose select items for
comparison of greatest importance
2. Identify common factors for evaluation
3. Place side-by-side for ‘apples to apples’ (as possible)
Benefits
When you prioritize the elements most valuable and you
place next to each other, pros / cons, better / less optimal
become clearer, even with qualitative measures!
Compara&ve
Analysis
Compare proposed projects or project factors
Characteristics
1. Initial Capital Investment
2. Number of Revenue Drivers
3. Time to Break Even 4. Financial Performance of
Similar Businesses
5. Fund initial product / service
startup from personal funds or
bootstrap?
Low
Potential
High
Moderate
Potential
Moderate
1
2 or 3
3+
2+ years
1-2 years
< 1 year
Weak
Modest
Strong
Low
Somewhat
High
High Potential Low
Compara&ve Evaluating costs & benefits of two or more strategic options:
Analysis
evaluates qualitative & quantitative
Strategic Option 1
Strategic Option 2
Benefit(s)
Quantitative
Cost(s)
Pros
Qualitative
Cons
Financial
Feasibility
Why use it
Opinion on reliability of financial projections & ability to
achieve projected income and cash flow
Process
1. Identify your financial standing, including startup capital
and revenue drivers, as well as industry conditions
2. Crunch the numbers
3. Calculate Return on Investment (ROI) and cash flows
Benefits
Numbers don’t lie! If the financial calculations show a
competitive return on investment, business people will be
much easier to convince
Example
Breath of My Heart Birthplace (2014)
Plannedvs.
Actual(Variance)
Why use it
Gives us a comparison between how we think the
project will person and how it actually performed
Process
1. Obtain data on financial projections
2. Collect data on financial performance
3. Calculate the variance or “difference” between the two
data sets
Benefits
Allows us to reassess assumptions and determine if they
were correct or not.
Plannedvs.
Actual(Variance)
From the Center for
Nonprofit Stewardship
Stress Testing
Why use it
Process
Benefits
Review scenarios in unfavorable conditions
Show “worst case” scenarios and helps take a more
educated decision before starting a project
1. Select stresses (e.g. high increase in interest rates,
sudden termination of grant, etc.)
2. Run financial projection
3. Assess what unfavorable conditions render the project
not profitable and their likelihood of occuring
Provides insight on whether or not the project would be
profitable in case any of the stresses manifest.
Stress Testing
Stress Testing
Resources
1. Upspring Resources Tab: upspringassociates.com
(some docs labeled Social Enterprise Associates)
• Tip Sheet #12: Non-Profit Earned Income Strategies – Where to Start?
• Emerging Topics #9: Small Business Incubation in Indian Country
2. Native American Community Development Corporation
www.nadc-nabn.org
3. Native American Community Development Institute
www.nacdi.org
4. 4Good strong online resources, many for free https://4good.org
5. Impact Foundry (Non-Profit Resource Center) For Templates:
www.impactfoundry.org/models-samples-templates
6. Center for Non-profit Stewardship www.nonprofitsteward.org
Questions? Answers?
Drew Tulchin
[email protected]

NLC-Upspring - Budgeting_for_Project_Performance final

Transcription

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