Introduction to developing a financing strategy for your needs
David Taussig & Associates is a company dedicated to the provision of a financing strategy for other companies. A financing strategy is important to the strategic plan of an organization. It sets out how the company plans to finance its operations to meet its objectives presently and in the future. A good financing strategy summarize the actions and targets to be taken over a 3-to-5-year period to achieve the targets. It states policies that guide those actions. Suggested structures and contents for a financing strategy are described below.
Start by describing where you are now
At this point or section, it is important to summarize the current state of the organization. You need to know where the organization is first. This includes the assessment of the risks facing the opportunities and the NGOs and resources it has.
Know where you would like to be
At this point, it is important to surmise financial targets for 3 to 5 years and is informed by the opportunities and risks identified in the first section. This step includes as a minimum: donor dependency, the desired funding mix, and the level of general reserves.
The desired funding mix
This is the balance and sources of unrestricted and restructured funds.
Donor dependency
Donor dependency is typically linked to the funding mix. It is the appropriate and realistic level of funding to accept from donor agencies.
Level of general reserves
This is usually expressed as the total number of days that the organization could continue without any external funding.
How to get there
DTA company describes this as the meat of financing strategy. This step describes the right actions you should take every year to finance your strategic plan and achieve the financial targets you already identified in the second section. This includes sections on how to finance core costs, how to increase the level and mix of unrestricted funds, how to build up reserves, how to apply funds to achieve a maximum benefit, and how to replace fixed assets and maintain them.
For instance, actions to increase the unrestricted income percentage might include increasing or introducing charges for services users to recover some or all costs of provision of the service, introducing activities that generate income, ensuring the use of all the under-utilized resources, and increasing the priority given for unrestructured funds’ fundraising.
Key policies
This is an essential section and it includes policies that guide the financing strategy. Examples given are for guidance alone and might not be detailed or appropriate enough for your organization or company.
Reserves policy
You should state the level of reserves you want to build up and how surpluses are handled. For example, we have the policy to maintain general services that are equivalent to six months of operating expenditure. The policy is reviewed by the board after every three years. Surpluses of the general fund in a given year will be added to the reserve. In case the reserve level exceeds the policy level, we spend it on the behalf of the beneficiaries adhering to our strategy.
If you want to meet your financing needs, working with a professional like David Taussig & Associates is crucial.
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