Managing Humanitarian Projects → Financial management

Financial management

Financial management is critical to effective project planning, allocation of resources, monitoring of effectiveness and accounting and reporting to stakeholders.

 Plan

A budget is a financial plan showing the resources needed to achieve programme objectives within a given period - setting out all expected costs of activities and all income.  A budget should:

• be sufficiently detailed and as accurate as possible
• have the approval of your managers, donors, colleagues and beneficiaries
• clearly separate the income expected from each donor
• include all the resources your programme needs
• provide useful monitoring information for you to run your programme
• include a cash flow forecast - when money will arrive and leave accounts

Record

An accurate record of incoming and outgoing financial transactions is essential.

Record everything that you do – how much, when, reference number, description of the transaction, plus receipts, invoice or authorisation form for all transactions. Ensure another person could follow the accounts by being:

• Organised: follow procedures and ensure documents are properly filed.
• Consistent: do not change the way you do things from month to month.
• Up to date: fill in all proper accounting records as transactions
 

Accounting records also provide valuable information about management effectiveness, resource use and performance in achieving objectives.

Monitor

Financial reports allow managers to assess project or programme progress and should be provided for both funders and beneficiaries at regular intervals. 

• Check actual income and expenditure against the budget
• Check progress towards achieving the programme’s objectives
• Identify areas of over-spend and under-spend to monitor organisational efficiency and progress towards the programme’s objectives
• Ask questions and take action - Will it be possible to achieve your objectives in time, within the budget?

If no, and changes are required:

• Report concerns promptly to your manager/head office and donors
• Review the budget and/or project plans with relevant stakeholders.
• Seek additional funding, budget re-allocations or programme extension 

Control

A system of controls is needed (for moving funds, carrying and storing cash, signing cheques, authorising payments) to reduce risk of errors, misuse or theft of resources, comply with the law and protect employees – from themselves and each other. 

For checklists and templates for these and other aspects of financial management, refer to www.fme-online.org for free downloads.   

 

 Adapted from Getting the Basics Right © MANGO 2010  and Financial Management for Emergencies, © 2005 John Cammack, Timothy Foster and Simon Hale