Financial management consists in allocating a budget for a proposed project, monitoring that the existing budget is sufficient to complete all the activities planned and also reporting on the financial story of the project during the final evaluation and reporting process.
Financial management is important because it allows the implementing organisation to use the allocated budget efficiently. Poor financial management will affect negatively the implementation of the project. For this reason is advisable to leave the budgeting of the project to individuals with experience and accounting skills.
Ideally, there will be a person in your organisation with the required skills. If not, a good strategy is that of recruiting people from accounting courses who need to complete working experience (it is good practice to offer financial reward even if your accountants are students). Financial management starts with the writing of a proposed budget while fundraising and it ends with the writing of the financial report.
Normally, donors will clearly state what their budget is and they will also suggest what they are willing to finance. For instance, many donors do not give money for salaries or to purchase office equipments (indirect costs). Keep this in mind when drafting your proposed budget.
Financial reports should be written more often than any other report. It is vital to review whether the allocated money was or not sufficient to complete a certain number of activities in order to understand whether the remaining budget will be sufficient to complete the project. If you realise that there is not enough money left and you discover this in advance, you will have time to initiate a new fundraising campaign in order to successfully complete the project. Also remember that the successful way of managing finances is to be transparent and accountable. Keep your books in order and ready for inspection at all the time.
