Excellent financial stewardship within charities and not for profits is non-negotiable if you are to maximise your impact and make a difference for the people you exist to serve. But too often it can seem difficult, overly complex or something that only accountants can hope to understand. Most Boards I meet take the responsibility for their charity’s financial position very seriously, but often have concerns about whether the reports they receive and the actions they take are doing the job properly.

Adrian Poffley contends that “good financial stewardship is not complicated; it is much nearer to common sense than rocket science” and I agree with him. But the reality can seem very different when stuck in the detail or grappling with day to day issues.

The key to it in my experience is a clear common understanding of what the key elements of good financial stewardship look like for your charity, and what each element is designed to do. Boards and senior management teams should be able to answer the questions “Why are we doing that?”, “What risks is that addressing?” and “How does this support us to deliver impact?” in respect to all financial governance processes, and focus their attention and questions accordingly.

Great financial stewardship consists of three major components that sit beneath the overall organisational strategy and all work together to drive impact:

• A clear financial strategy: where are you trying to get to financially? And how will you get there?
• Effective management processes: which enable the strategy to be executed; and
• A strong internal environment: which enables the management processes to be implemented efficiently and effectively.

This diagram explains it more clearly:

A Poffley, Financial Stewardship of Charities: Maximising Impact in Times of Uncertainty, 2002

If any element of this structure isn’t working then your ability to deliver maximum impact will be hindered. But when it works it’s transformative:

• Your finance people are proactive business leaders in your organisation;
• Most of their time is spent working as valued partners of other teams and helping deliver great services and effective fundraising, rather than just processing transactions and producing information;
• Financial information illuminates your current situation and future choices, and is regarded as a ‘must read’ by trustees, senior management team, staff and volunteers alike;
• The possible impact of our fast changing world on your charity is quickly modelled and understood;
• It’s clear that your finance team deliver an approachable, clear and valuable service to the rest of your organisation.

Does this sound like your charity? If so, fantastic! If not, then get in touch and we can discuss how to change things.