Financial management

What is financial management ?

Financial management refers to the tools and processes used to improve the financial performance of an organisation over time, whether it is profit-making or not. Financial steering provides an organisation with the necessary tools to measure its activity, monitor its key indicators, analyse its financial performance, anticipate its needs and mitigate financial, legal and statutory risks. This is therefore a powerful decision-making tool for managers.

Who is responsible for financial management within the organisation?

Some associations, particularly growing ones or those with sufficient resources, have a department and a team dedicated to this area. In organisations with fewer resources, this task is usually performed  by the project leader himself, a volunteer or an employee, working hand in hand with an external accounting firm, particularly for accounting activities, financial statements and audit,accounts validation, etc.

Some preconceived ideas about financial management:
  • Financial management is just about commercial companies! The term financial management may be connoted with profit-making, whereas SSE organisations  are primarily driven by social and/or environmental utility and impact. However, organisations facing rising needs and receiving fewer funding-particularly public funding- it is crucial to improve financial efficiency and to show interest in this key dimension of an organisation.
  • It’s a complex process: It is true that implementing financial management at its early stage requires an overhaul of tools, an analysis of internal processes and time. However, in the long run, it will make strategic orientations and the steering of activities easier as it is a powerful lever for the organisation’s efficiency.
  • This may raise questions among employees “finances govern decisions, it is a tool to control performance”: Financial management may be seen as a control tool for employees, whereas in reality it increases transparency and facilitates communication within the organisation, thereby encouraging support for the project.
The obstacles and challenges faced by organisations in the field:

ScaleChanger has been helping impact-driven organisations  on their development issues for the last ten years and has observed the following: 

  • A lack of resources to allocate to financial management: In an already precarious context for SSE organisations, it can be difficult for organisations to invest in this area, which requires time, financial resources and specific skills. 
  • A lack of time: Structuring and steering financial management requires the involvement of everyone: The members of the Management Committee to co-design the tools, but also the contribution of the teams and members of the governance. This means some time, which is often in short supply. 
  • Attractiveness: It is difficult to attract people when salaries in SSE organisations are generally lower than those in commercial companies.
  • A need for professionalism: Establishing its financial management process on traditional methods or tools that are not very robust can have serious consequences for the organisation. A data entry error can have a severe impact on the organisation’s cash flow, making it vulnerable.
  • The reluctance of managers: Lack of interest, reluctance to work with figures, etc. Financial management is not exactly popular among project holders. However, with the right support, managers and/or their teams can quickly build up their skills and demystify financial data management. Moreover, in the absence of structured financial management and internal control, the risks of abuse cannot be ruled out and can be damaging to the organisation.

What are the benefits of robust financial management ?

  • Data-based decision-making
  • Increased efficiency and effectiveness thanks to standardised and automated processes
  • Anticipation ofneeds and risks
  • Increased confidence among internal and external stakeholders
  • Compliance with legal and financial requirements
  • Increased chances of obtaining funding thanks to transparent and efficient financial management. Having someone dedicated to financial management within your team is a good signal, and even a prerequisite, when you want to raise funds!

Why is it important for an organisation to have good financial management
when scaling ?

Scaling up generally involves investing in new resources in order to increase your impact, resulting in significant risk-taking and often an in-depth transformation of your economic and organisational model. When an organisation accelerates its development, activity and needs will increase. It is important to monitor your performance in order to adjust your strategy objectively and continuously. This can only be done through reliable indicators and in consultation with all partners. Appropriate economic and financial management tools can save a significant amount of time for an organisation undergoing a scaling process. You can mobilise and involve your partners over the long term, and give your organisation the agility it needs to effectively expand  your model to a wide range of beneficiaries.

Financial management therefore becomes all the more crucial when your organisation is preparing for or is entering a scaling phase. It allows you to : 
– get an idea and update on the organisation’s level of structuring and professionalisation on this matter, and ask the right questions about the practices that need to be strengthened or changed, while reflecting on the organisation’s socio-economic model.
– have a clearer vision of the current situation, so as to know where to go in terms of ambition and impact.
– make it easier to explore the different strategies for scaling up. The clearer the financial management, the easier it is to draw up projections and hypotheses.
– monitor and steer the growth of your business using robust tools that are easy to adapt.
– reassure potential investors and other strategic partners. Well-tested financial management overseen by a competent person increases the trust of your (future) partners.

How does ScaleChanger help organisations with their financial management issues ?

  1. First, we carry out an analysis of existing tools and of the finance department organisation (if there is one). We carry out a mapping of available data, an analysis of flows, a review of the organisation chart, etc.).
  2. We then carry out an analysis of financial management requirements.
  3. Based on the needs identified, we co-build dashboards with the members of the Management Committee and the person or team in charge of financial management to define indicators and practical, effective tools for monitoring (dashboards for budgets, cash flow monitoring, financial year results file, etc.). 
  4. In the interests of compliance and error mitigation, we check that data from the accounts feeds correctly into the internal tables and that there is a fair and fluid match between the accounts and internal reports. 
  5. We then develop internal control procedures and KPIs to identify relevant activities/costs. For example, for an association that provides training for women who have been excluded from the labour market, how many women have been trained in a given month and how much did it cost the organisation. These ratios can be shared with the teams to show that the objectives set have been achieved, and any possible overruns. This encourages the team to support and understand the financial issues at stake and to make decisions (such as the need to recruit).
  6. By the end of the support mission, organisation have:
    1.  clear processes and procedures to steer financial management:
    2. relevant tools to improve the robustness and fluidity of financial management,
    3. an action plan to structure or strengthen financial management ahead of a scale up
    4. greater peace of mind and decision-making supported by tangible elements
    5. greater confidence in raising funds


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