There are several options that one can use for managing their finances, this could be either managing them on your own, hire a full time employee, hire a part time accountant or a third party who manages all finance related activities for you, for example a Chartered Accountant.
Most often organizations have a dedicated department that looks after the financial matters of the company. A finance manager is designated for handling finance and managing its resources within an enterprise. All finance-related decisions are taken at this position. Depending on the company profile the finance department can have several designations to cater to the various needs of the company.
Financial Management is a vital activity in any organization. It is the process of planning, organizing, controlling and monitoring financial resources with a view to achieve organizational goals and objectives. It is an ideal practice for controlling the financial activities of an organization such as procurement of funds, utilization of funds, accounting, payments, risk assessment and every other thing related to money.
In other terms, Financial Management is the application of general principles of management to the financial possessions of an enterprise. Proper management of an organization’s finance provides quality fuel and regular service to ensure efficient functioning. If finances are not properly dealt with an organization will face barriers that may have severe repercussions on its growth and development.
Financial Management in NGO is undertaken by its governing body, board members and finance staff.
Governing Body: The body comprises of members from different committees of the organization such as finance, public relations and project. Being the ultimate authority in any Non-Governmental Organization, the governing body plays a lead role in financial department. According to the nature and state of the concern, it is also known as Council or Board of Trustees or Board of Directors or Governing/Executive Board
Board of Members: The governing body’s plans and policies give a proper direction to the board members. In an NGO, board members are at times volunteers (non-salary people) who are ultimately responsible for the financial aspects of the organization. Although they might not control accounting methods or prepare financial reports by themselves, however they must ensure that everything is undertaken in proper order. They cannot refrain from their duties, during their association with the NGO and can only do so by resigning from the government body. The board comprise of honorary officers, who are appointed or elected to certain positions on the board. The main responsibility is to supervise implementations of all board decisions and sign legal undertakings. It will be advisable to take individuals who have experience in Financial Management such as Ex-Bankers, Accountants, and Finance Managers among others on board.
Financial Manager: The finance manager is the head of the finance committee in an NGO. Apart from supervisory functions and monitoring responsibilities, the finance manager exercises the following duties:
Ensuring that all transactions are properly accounted for and the financial systems are maintained, under all procedures and controls.
Managing bank accounts and overseeing money transfers between head-offices, country offices and field offices.
Signing cheques, authorizing payrolls and other payments.
Assisting and guiding the board by providing relevant financial information during budgeting, accounts to donors and other decision-making activities. The manager does so, as and when requested.
Financial Assistant: The finance manager is guided and assisted by the financial assistant. The main responsibility is to report to the manager and implement work, as and when directed. The assistant role should be preparing books of account, preparing cash memos, cheques and bills. He is the in putter for the transactions for the finance manager and first level of financial control and management.
Admin Manager: Where finance manager and assistant have specific duties, the admin manager has three-fold responsibilities: Finance aspects, HR and administration and logistics. The Admin has to take overview and control of the hiring, inventories, stocks, and all other nonspecific activities. Since it is a senior position it is advisable to have an experienced person on the job.
Admin/Cash Assistant: The admin manager is assisted by the admin/cash assistant. The cash assistant to admin manager is similar to that of finance assistant to finance manager, only that the functionalities are different. The job of finance assistants majorly surrounds around financial resources, aspects and matters, whereas the job of admin assistant spreads across various spectrum of duties, finance being one.
Any large NGOs, all the above posts are exercised by different persons. In small and medium NGOs, the financial managers and assistants take the overall responsibility. In this case, the role of finance manager also includes that of admin manager. In a similar manner, the job of financial assistant also includes that of admin assistant. Irrespective of its size, there is a governing body and board across all NGOs.
Conclusion: To sum up, financial management is one of the most significant functions of any organization, including NGOs. Financial control is at the heart of financial management. A well planned and competent financial control ensures proper use of money, financially protected members and safe assets. Financial decisions also effect on overall management and activities of NGOs. With proficient and tactical finance strategies with changing time and circumstances, Non-Governmental Organizations can successfully manage their financial resources and ensure steady growth and development within the concern. With sound financial planning, organizing, coordinating, executing and finally reviewing; these organizations can skyrocket their funds and achieve its objectives in the near future
All financial decisions, activities and plans are done in accordance to a set of procedures that form the basis of the financial policy. Once the financial objectives are confirmed, the next move is to frame policies to guide its further proceedings. Financial management policy of an NGO is a manual that covers all the accounting policies, procedures and systems of the organization. Primarily, there are two purposes for framing a financial policy
To look into proper governing of the financial transactions taking place in the concern so that the staff can abide by the set procedures and
To fulfil requirements of local statutory bodies and establish strong management practices, as adopted by the NGO.
Principle of Financial Policy: While developing a financial policy it is a good practice to incorporate the following seven principles suggested by experts. These principles lay the foundation of an effective financial policy which would ultimately result into a healthy organization.
1. Consistency: The financial policy should be consistent, which simply means that it should not allow manipulation of processes and systems. All the staff members should consistently adhere to the financial policy and there should not offer much flexibility. A consistent policy will ensure better accountability, transparency, better information dissemination and timely reporting.
2. Accountability: The financial systems should be such that it makes the organization more accountable to its stakeholders. As an NGO all you should account for all the resources and its expenses. For this the policy should clearly indicate the procedures for reporting and publication of financial data.
3. Transparency: An organization should disclose all its operation and provide necessary information to stakeholders. This means that the NGO should provide accurate and timely information to donors, beneficiaries and all relevant stakeholders.
4. Viability: For an NGO to be viable in the long run, the policy should set in place a mechanism that would maintain a balance between its expenditure and income. For any organization to be viable it is important that team leaders are able to generate sufficient funds to continue the functioning of the NGO.
5. Integrity: All team members should follow all rules set by the financial policy. As a founding member you should set precedence in following and adhering to all rules.
6. Oversight: The policy should also provide oversight into the future and should accordingly suggest measures to cope with future challenges. This would include risk assessment; strategic planning etc.
7. Accounting standards: The policy should be such that it incorporates valid national standards and protocols. The accounting systems should meet national and international standards of financial accounting and recordkeeping this would facilitate easy transactions between diverse funding strategies.
Scope of Policy & Procedures: Financial management policy throws light on the procedures, systems and accounting policies that are prevalent in the organization. The policy contains information about input, output, processing, control and distribution of financial data. The accounting policies and procedures are set out to:
Make certain that the books of accounts of the NGO are carefully prepared to confirm its accounting principles and practices.
Enable NGO’s authority and management heads to procure timely and accurate financial reports on every month. This also fosters stable financial management.
Ensure that funds and other resources are being used in an accountable and correct manner. Also, make sure that financial approach is in line with accounting principles and best practices in reporting organization’s requirements.
This document is not just necessary for you to manage your finances and accounts, but this would also help you in complying with legal protocols. The policy will cover the flow of financial data within the organization that would ensure that the health of your NGO in terms of finances remains good. Having a sound financial policy in place will certainly enable you in keeping track of the NGOs expenditure, basis which you can plan your fundraising strategy.
Purpose of Policy & Procedures: Financial policies and objectives have the following significant objectives:
To provide assistance in maintenance of controls.
To serve as a training and monitoring resource.
To be a reference document to be used by the management, employees, auditors and stakeholders.
To increase accuracy and completeness of data that is posted from source documents (invoices, journals, cashbooks, payment receipts) to the computerized system.
To offer accurate and credible reports so that management can exercise effective control over organizational operations.
To detail-out the administrative and operational procedures for input, output, processing and distribution of information so as to ensure complete security and privacy of files and documents.