The Importance of a Solid Financial Plan for Your Association

By Guest Blogger Mike Hensley

Leading an association without a financial plan is akin to driving a school bus wearing a blindfold.  Both bad ideas with bad consequences.

In its most basic form, a financial plan provides an indication of present and expected resources, as well as a blueprint for using those resources for optimum benefit. Besides boosting public credibility and attracting long-term members, a serious financial plan can even be a lifesaver for many associations.

Getting Started

The ability to summarize and analyze your operating assets is essential. Start there –   know what generates income for your association. This will provide a basis for deciding which programs to continue and which ones to eliminate.

Budgeting is also crucial. Be realistic in planning and always ask yourself, “What factors are looming that could impact our expenses?” Check announcements by federal, state and local government for cost increases, as well as those by utilities, insurance providers, vendors and others. What you discover may require you to reassess your priorities.

Also, when budgeting, get feedback from you association members as to which benefits are valued and which are not. Make it a habit of asking. Equally important, investigate your competition.  Know what they’re planning if you can—in particular new programs that could undermine your membership and erode your donor base. This intelligence can influence where you concentrate expenditures and resources.

Audits Add Credibility

Good governance is high on everyone’s agenda. When you’re accountable for other people’s money, you need a transparent means of tracking expenditures. Consider having your year-end financial review audited by a third-party accountant. This will instill confidence and can be important to both returning and prospective association members.

Though outside audits can be time consuming—even intimidating—they’re worth the cost in the long run. Besides showing the world you’re serious about the financial integrity of your group, they can help you pinpoint areas for improvement. Good accounting is fundamental and a good audit is a part of the process.

Finding A Good Money Manager

If you want your organization to grow and remain financially stable, consider hiring someone experienced in managing operating assets. Managing the money is a time consuming process, and it works best if someone other than the association leader assumes primary responsibility.

When looking for a good money manager, make experience and integrity your two most important themes. Your manager should have experience in the role and come with solid recommendations. These recommendations should attest to the candidate’s organization skills, as well as his/her ability to credibly and creatively devise ways to handle offsets in revenue when they fail to materialize (which will happen). If you’re not comfortable doing the search internally, consider using a recruiting service.

Though reporting structures may vary from one association to another, it’s important to have an effective system of checks and balances in place. Keep everyone accountable – “Trust but verify” as they say.

Handling Bad Financial News

Suppose you took all of these steps, but still experience financial irregularities.  What do you do? Answer: Lay out a plan that in essence says “This is where we were deficient and this is how we’re going to correct the deficiency moving forward.” Be honest and upfront about what happened and show the changes implemented. Then give periodic updates on your progress.

Associations run into financial difficulties for a variety of reasons but most occur when they lose focus—they overspend on recruiting new members and underdeliver value to existing members. Both pursuits are important, but there must be balance. Planning can help immensely in maintaining focus and balance.

Mike Hensley is a Certified Financial Planner™ with Guardian Capital Advisors, LLC, a Raleigh-based Registered Investment Advisory firm. Guardian provides planning and investment advice to individuals, families, businesses and non-profits. Guardian is driven by a core belief that clients want objective, straight-forward advice that simplifies their lives.