Financial Management - Edward Allen

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Financial
Management

Edward Allen

CGA
-
CHE Annual Staff meeting in Kampot

21
st

September 2005


Financial Management


Why is Financial Management Important?


The 3 principles of financial management


Honesty, Discipline, and Judgement


Putting these into practice in a practical way


Cost Management

expenses, raw materials
etc


Income Management

adapting to new
budgets


Time Management

When things take
longer to deliver


Summary and question time




Why is Financial Management
Important?


Bible: 1 Peter 4:
10 Each one should use
whatever gift he has received to serve
others, faithfully administering God's
grace in its various forms.


God wants us to be faithful with what we
have


Finances are an important resource we
have

Bad financial management causes projects
to fail



Who is responsible for Financial
Management?


Is it the CGA
-
CHE Accountant?


Is it the CGA
-
CHE Project Coordinator?


Is it the CGA
-
CHE Missionary workers?


Is it the CGA
-
CHE Program Managers?


Is it the CGA
-
CHE Program officers?


Is it the CGA
-
CHE CTT?


Or Even the CGA
-
CHE Volunteers?

Who is responsible?

The Answer:

You are!

All staff are responsible because all
are involved in spending money

Everyone is important in helping CGA
manage finances better


What is our focus at CHE
-
CGA?


Changing communities with the love of God


We are a team


Financial management is a team effort


We have to work together, share information,
and help each other


Financial management is all about working
together

Financial Management is too big and important to
be left to one person!

Financial Management


Why is Financial Management Important?


The 3 principles of financial management


Honesty, Discipline, and Judgement


Putting these into practice in a practical way


Cost Management

expenses, raw materials
etc


Income Management

adapting to new
budgets


Time Management

When things take
longer to deliver


Summary and question time




The 3 principles of

Financial Management


1) Honesty


2) Discipline


3) Judgement


All financial management is based on
these 3 principles

How do we do this?


Bible: Exodus 20:15 Do not steal


Bible: Leviticus 19:11 Do not steal. Do not lie.
Do not deceive one another


Bible: Colossians 3:9 Do not lie to one another,
for you have taken off your old self with its habits


If you are not honest then the information you give
has no meaning and the project will fail

1.
By Being Honest

2. By Being Disciplined


Bible: Titus 1:8 He must be hospitable
and love what is good. He must be self
-
controlled, upright, holy, and disciplined.


Bible: Luke 12:35 Be ready for whatever
comes, dressed for action and with your
lamps lit


Financial management requires a lot of
care and detailed record taking, you
cannot be bad at this and manage
finances well

You have to do the basic things always
right

3. By using good judgement


And making wise decisions


It is not just about being honest, it is
about applying that to all that we do


Be prepared to take advice


Think before making decisions


Listen to other people


Respect authority over you

Apply the truth in making decisions



Financial Management


Why is Financial Management Important?


The 3 principles of financial management


Honesty, Discipline, and Judgement


Putting these into practice in a practical way


Cost Management

expenses, raw materials
etc


Income Management

adapting to new
budgets


Time Management

When things take
longer to deliver


Summary and question time




Cost Management


Bible: 1 Peter 5:8 Be self controlled and
alert


So easy when managing finances to lose
self control and spend money on stupid
things!


Goal: To manage our costs, the things we
spend money on, so we can deliver CGA
-
CHE goals of community transformation
with the resources we have got

Cost management is NOT optional!

Why is cost management
important?


The No.1 reason that projects fail financially is
bad cost management


Cutting costs should be something you are
always looking to do at all times


Why?


Because then we can do more with the money
we have in the community, be more efficient


Before asking for more money you must look at
all your costs carefully and try and cut them

Cost
-
cutting never stops

A lesson from Business


Business Fact: Things always cost more
than you think


For example: Did anyone here last year
think gasoline prices would go up 50%


Or that as a result raw material prices
would go up?


Do you know the price for gasoline next
year?

Some costs are hard to predict

our
responsibility


Step 1: Know what your costs
are


You have to know what you are
spending your money on


What your costs are


Everything: even the small things


Make a list; in every single project this is
vital


It is important to keep good records

If you don’t know what your costs are, you
can’t control them

Step 2. Know what you can
change


Some costs are very difficult to change


Like the price of gasoline


(But make sure you are paying the lowest price)


But most costs you can change


Like how much gasoline you use


:travel less


Or with paper you use: think about putting more
information onto 1 page, print both sides

Know what you can change, think of creative ways
of cutting costs!


Step 3: Change!


If you can find a way of cutting the cost of doing
something and still deliver the project goals then do it!


TODAY


We all have to look at ways of cutting costs all the time


If every CHE staff member found a way of saving 1000
riel every week:


50 000 riel saved per week


2 600 000 riel saved per year


$650 per year

Make it happen!


How to manage expenses


Everyone has to know clearly what you are
allowed to spend money on


:No exceptions


You MUST keep good records


You MUST have a clear plan as to when to
spend the money you intend to spend


Get a good price for everything you buy


Take responsibility and be disciplined

We are all responsible

How to manage raw material
costs


Know what your costs are, very precisely


Know exactly what specification of material you
need


:Could you use a different cheaper material?


Could you use less?


Get good information from many different places


Negotiate hard and get a good deal

Use the money you have better



How to manage fuel costs


Use less fuel


Plan differently your meetings so you go less
often or two people travel at the same time


:Travel less


Review who actually has to travel?


Assume the high fuel price will continue for a
long time


Cut other things from your budget

Take responsibility for your own costs


Financial Management


Why is Financial Management Important?


The 3 principles of financial management


Honesty, Discipline, and Judgement


Putting these into practice in a practical way


Cost Management

expenses, raw materials
etc


Income Management

adapting to new
budgets


Time Management

When things take
longer to deliver


Summary and question time




Income Management


Goal: to deliver the CGA
-
CHE
community impact goals even when your
budget changes


Matching what you want to do with what
resources, including financial, to do


Incomes change, so we have to manage
that change effectively


NGO work is just like commercial
businesses in this respect

Management is about managing change

Why income management?


The desire for increased income is
always there but actually income, from
whatever sources, is normally less than
we expect


Income management is about finding
ways of delivering our project goals with
less money


It is important because if we are not
good at it we will not deliver our goals

Stay focussed on delivering the goals

A Lesson from Business


Business Fact: You always get less
money than you expect


Reality: You have to be able to adapt
your budgets and plans to still deliver
your goals with less money to do them


Good income management is vital in
order to deliver your goals in all
situations

Good management is not an option

Step 1: Know what you want to
spend money on


You have to decide clearly what your priorities
are to spend money on


General guidelines:


Personal comfort is a low priority!


Cost effective projects with a high likelihood of
success are a high priority


The projects that the community wants that you
can deliver effectively


PRIORITISE


Step 2: Respond to your
budget


You must know very clearly what your
budget actually is, so important


If the budget goes down you can do less


Know what you do well


Work on facts not predictions


Don’t forget what the community needs

Do what the community needs and you are
able to deliver

Step 3: ……CUT!


If you get less income, you have to cut
programs


Do not delay


Usually better to fully cut a part of a
program that to do it with only a little
funding


:Make sure everything you do is
community lead, effective, and impacting

Do NOT delay in making decisions even if
difficult decisions

Financial Management


Why is Financial Management Important?


The 3 principles of financial management


Honesty, Discipline, and Judgement


Putting these into practice in a practical way


Cost Management

expenses, raw materials
etc


Income Management

adapting to new
budgets


Time Management

When things take
longer to deliver


Summary and question time




Time Management


Bible: Matthew 25: 1
-
6, 10
"At that time the kingdom of
heaven will be like ten virgins who took their lamps and
went out to meet the bridegroom. Five of them were
foolish and five were wise. The foolish ones took their
lamps but did not take any oil with them. The wise,
however, took oil in jars along with their lamps. The
bridegroom was a long time in coming, and they all
became drowsy and fell asleep. "At midnight the cry rang
out: 'Here's the bridegroom! Come out to meet him!' "But
while they were on their way to buy the oil, the
bridegroom arrived. The virgins who were ready went in
with him to the wedding banquet. And the door was shut.


Goal: To respond effectively to delays

Be able to still deliver even when delays come


Lesson from Business


:Things always take longer than you expect


Budgets have to respond to this


Usually this means increased cost


Financial management has to respond to
changes like this aggressively

Manage change now, do not delay

Time management


Plan properly in the first place: realistic
timescales


Know quickly when delays are happening and
communicate this


Delays usually mean increased cost: revise
budgets, cut where necessary


BUT: work very hard to not let this happen


Try and save time in other areas

Deliver on time and on budget

Summary


Everyone is responsible for financial
management


Financial Management is impossible
without Honesty, Discipline, and Good
Judgement


Financial management is mostly about
managing and cutting costs


Even the best organisation in the world
is looking to always cut costs!

Never stop improving your financial
management!


Any Questions?