Financial management is one of the most important responsibilities you will have as an Executive Director. It is your responsibility to ensure the financial success of the organization so it does not have to dissolve … but no pressure.
You are an Executive Director of an association or chamber of commerce. Now what? Here are 5 tips all executive directors need to know about financial management in order to be successful.
Tip #1: Always know where you are with your budget vs. actual income and expenses. Don’t let this slip.
Enter all of your income and expenses and reconcile your accounts on a MONTHLY basis. This will help you catch any accounting discrepancies (improperly recorded payments, etc.) and clear them up quickly. Schedule time in your calendar to do this. Don’t let a month go by without doing this, as one month easily becomes three months and you’ve lost track of small (but nonetheless important) mistakes.
Tip #2: Create internal controls to prevent any fraudulent financial activity.
Have clear-cut procedures in place to keep your finances in order and avoid any mistakes that could compromise your non-profit status and the trust of your board and members. For example, don’t let one person be in charge of your finances. Delegate control and review of certain transactions and statements. Standardize reimbursement for staff and volunteer leaders. Balance your books at the same time each month. Lastly, have an external audit of your organization’s finances to ensure that your financial statements are free of misstatements.
Tip #3: Set and monitor key performance indicators (KPI’s).
Set and monitor key performance indicators (KPI’s) so you can track whether your organization is meeting its financial goals and managing money responsibly. Then take these KPI’s to your board to show them how you are tracking your success. KPI’s can be anything that’s important for your organization, but some examples include membership growth by tier, ratio of dues income to non-dues income, retention rates, and media mentions.
Tip #4: Your budget is your financial roadmap.
Even though your budget at the beginning of the year will almost never exactly match reality at the end of it, you still should establish guidelines for your organizational finances and review it monthly. Here are a few things to think about in your budget development:
- What expenses popped up over the last year that weren’t accounted for in the budget?
- What new expenses might you have to prepare for in the coming year?
- Look over the previous year’s finances and see where you may be able to trim costs
- Be realistic about your expected income for the coming year
Tip #5: All events should be profitable.
You know that feel-good event that you do every year, and everyone loves, but it barely breaks even? Find a way to make it profitable if you want to keep putting it on. This may seem small in the grand scheme of things, but it’s a simple rule you should always follow. Take a look at our article on Sponsorship and Fundraising for creating ways to bring money into every event.
What else do you need to know to be successful in your Executive Director role? Check out our new book – Executive Director: 101 What Execs Need to Know for Success. It’s an easy read with helpful hints, secrets for success and best practices for Executive Director success across 14 different topic areas ranging from membership growth, development and engagement to strategic planning and financial management. This book will help you be the best leader for your organization.
Check out our blog for more Executive Director 101 tips.