The financial management process develops in 3 phases; Planning, Organising and Reporting
Planning consists in identifying financial resources and match them with the requirements of the project. Planning means to calculate the estimated cost of each of the planned activities to draft the budget of the project. The budget will include a breakdown of all the costs to be covered by the project in relation to each activity and the total amount of money requested to the donor.
When drafting the budget you will need to diversify Direct from Indirect Costs and to indicate the Cash Flow Planning.
Direct Costs are those directly related to the implementation of an activity. For instance, the fees paid to the facilitator to train your target group.
Indirect Costs are those related to the organisation as a whole. For instance the rent of an office where to direct your activities, or bills to be paid for running your office. Keep in mind that not all grants cover Indirect Costs. Accordingly, you should consider exploring additional ways to raise money to cover these expenses.
Cash Flow Projection means to predict how much money the project will need in its main phases. This is important to ensure that you will have enough money to implement a new phase of the project or, if you don’t, to know how much money you need to collect. Consider that funding bodies tend to give you money in instalments. Accordingly, you have to understand how much money your donor will pay out before the project starts, and how the rest of the grant will be disbursed. It is also worth considering that many donors will give you a substantial part of the agreed grant after the project is finished and after a positive assessment of its results. This is of crucial importance because, sometimes, organisations struggle to find money to cover all the costs of the project. You need to plan well in advance and find other ways to cover the costs of the project without the whole grant you were promised.
