Why is financial health relevant for civil society organizations?

For some people, talking about the financial health of civil society organizations is a complex or even a secondary issue. However, the monetary aspect is just as important as our substantive work if we want our organization to be properly managed and be able to fulfill its objectives.

In this sense, a thriving civil society organization that manages to sustain itself over the long term usually has reasonable financial control.

Financial health, a tool that inspires trust

The financial health of our organizations and clarity about their limits provide confidence to our donors and key stakeholders. It also helps the Assembly and staff to know our organization better and contribute to its sustainability, as they are the first to be affected by a poor financial health.

An essential tool to achieve our objectives

Civil society organizations often have fewer resources than are necessary to work optimally, so we need to be clear about our financial needs. This will help us to have fruitful discussions about our current situation and our challenges with key stakeholders. This translates into fluid communication that brings confidence and an even greater ability to attract new funding sources.

For organizations with fewer resources, it is essential to note that financial health becomes even more critical. They will need to learn to manage themselves better. If they can do so, they will ensure their growth. Civil society organizations will have more difficulty achieving their goals if not.

Civil society organizations need clarity about their financial health

This clarity has many advantages. On the funding side, clarity about the organization’s financial needs allows us to better explain to donors:

● The resources we need;

● What activities are we going to allocate resources to;

● How will those resources translate into tangible results

These are questions that must be clearly and logically answered if we are to be successful in our fundraising objectives. Few donors are willing to give their resources to civil society organizations that cannot answer for their financial health.

Certainty for all stakeholders

Clarity about finances allows for optimal management of resources. This gives certainty to donors, who have complex requirements for authorizing donations.

Within civil society organizations, clarity about financial needs forces us to define what resources we need to carry out the planned activities, which helps us better identify priority activities. Clarity and transparency about financial needs will enable the organization’s leadership to use resources efficiently.

Of course, reaching this point of understanding takes time and resources. However, we recommend viewing it as a long-term investment.

Better efficiency and outcomes

Proper financial planning will allow us to know which activities are most efficient from an economic point of view. One of the significant challenges facing civil society organizations is the idea that the financial aspect requires very complex knowledge.

Of course, financial health requires specific skills, but nothing is impossible to achieve. In addition, every civil society organization should have at least one financial expert in charge of these issues.

Start from the basics

Having accounting support ensures that we are doing good planning. However, we can all do this analysis if we use common sense. Remember that it is better to have a simple budget than nothing at all. So do not  be afraid and start with the following steps:

● Make a list of all your organization’s needs. Considering the basics of operating expenses, a penny is essential! Identify the actual cost of each need. If you are not sure, ask for several quotes – we must be accurate!

● Determine if your current income is sufficient to cover the expenses. Is the money available enough to cover the monetary requirements? Will it be necessary to cut the costs or look for additional resources? How much more do we need? How much money do we have left over at the end of the month?

Financial health begins with understanding our real needs and knowing how much we need to cover them. If your organization’s financial health is good, perhaps a specialist’s help is unnecessary. But if you are  struggling to make ends meet, it may be time to ask for help. In either case, taking the first step and determining where you really stand is essential. From there, you can make decisions.

Consider and determine what financial health looks like in your organization and what tools or support you need to achieve it. This clarity will enable you to grow and help you manage the necessary resources – internally and with donors – to achieve your envisioned goals.