Financial Strategy and Strategic Planning

A financing strategy is integral to an organisation’s strategic plan.

The financing strategy sets out how the organization plans to finance its overall operations to meet its objectives now and in the future. It 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 that will guide those actions.

A financing strategy should include :

  1. Current state: Establishing where the business is starting before implementing a new strategy.
  2. Financial Target: Key financial targets for 3 to 5 years’ time, and outlines the risks and opportunities identified in the current state.
    • Desired funding mix
    • Donor dependency
    • Level of general reserves
  3. The strategy to reach the financial target
    • increasing the mix and level of unrestricted funds
    • financing core costs
    • building up reserves
    • replacing and maintaining fixed assets
    • applying for funds to achieve maximum benefit
    • increasing or introducing fees for users of services to recover some or all of the costs of providing the service
    • introducing income-generating activities
    • making use of under-utilized resources
    • increasing the priority given to fundraising for unrestricted funds.

The financing strategy should take into account some key policies, such as :

  • Reserves policy: what level of reserves you aim to build up, and how surpluses will be handled.
  • Core costs policy: methods used to recover support costs from projects and funders. It will also clarify the policy on subsidizing other projects and the management of those projects.
  • Pricing and cost recovery policy: fees charged to clients, fees for operations and the basis and formula used for the charging, and the pricing structure.
  • Ethical policy: lists organizations and individuals that NPO and NGO will or will not accept funds from and what funds may or may not be used for. This will be particularly relevant to NGOs involved in advocacy work.
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