Helping NGOs do more with their money

Developing a financing strategy

Introduction

A financing strategy is integral to an organisation’s strategic plan. It sets out how the organisation plans to finance its overall operations to meet its objectives now and in the future.

A financing strategy summarises targets, and the actions to be taken over a three to five year period to achieve the targets. It also clearly states key policies which will guide those actions.

A suggested structure and contents for a financing strategy are outlined below.


1.  Where are we now?

This section summarises where the organisation is at the start of the strategy. This includes an assessment of the key risks facing the NGO and the opportunities and resources it has available.

2.  Where would we like to be?

This section summarises key financial targets for three to five years’ time, and is informed by the risks and opportunities identified in the first section. It will include as a minimum:

3.  How do we get there?

This is the ‘meat’ of the financing strategy. It describes what actions you will take each year to finance the strategic plan and achieve the financial targets identified in the second section.

This might include sections on:

For example, actions to increase the percentage of unrestricted income might include:

4.  Key policies

This section will include policies that guide the financing strategy.  The examples given are for guidance only, and may not be appropriate or detailed enough for your organisation.

Example: It is our policy to maintain general reserves equivalent to 6 months of operating expenditure.  This policy is reviewed by the Board every three years.  General fund surpluses in a given year will be added to this reserve.  If the reserve level exceeds the policy level, we will  spend it on behalf of the beneficiaries in line with our strategy.

Example: It is our policy to appoprtion overhead costs to projects on a monthly basis, in proportion to the direct costs incurred by each project.  Each project should generate enough income to cover both its direct and apportioned indirect costs, unless the Board authorises otherwise for particular cases.

Example: It is our policy to charge users of the clinic for consultation, drugs and lab tests.  The basis for the charge is cost plus 10% to cover overhead.  Patients unable to pay may apply to our 'Special Scheme' for assistance.

Example: It is our policy to consider the ethical nature of all funds offered to us before accepting. For example,  we will not accept funds derived from any illegal source, or from corporates engaged in arms dealing or child labour.  We will not accept funds that create a conflict of interest.  We consider each case in line with our values.

See an example financing strategy here.