Financial Best Practices in Turbulent Times
January 27, 2009, 4:19 pm
We interviewed Raj Thakkar, Founder & CEO of Charter School Business Management Inc. (CSBM) and asked him to give some tips on how to best manage your non-profit’s costs during this financial downturn. CSBM provides professional development and shares best practices, ensuring that business and operations leaders of charter schools are prepared to manage their non-academic responsibilities. CSBM is also an outsourced solution. Its trained and experienced staff members successfully manage finance, operations, human resources and compliance responsibilities for schools. These services, which are tailored to the unique culture and needs of each school, involve proven techniques that allow school leaders to focus on what’s most important – student achievement.
Raj Thakkar and his team consult for schools in New York, New Orleans, Chicago and most recently, in Newark. They have experience reorganizing finance and operations and making them run more efficiently. We hope this gives you some ideas to keep things run smoothly in this time of turmoil!
What is your favorite "trick of the trade" that you would recommend to a non-profit to best streamline their operations?
We created CSBM’s Binder System for filing our financial and operational documents, since wearing multiple hats, as most folks in the non-profit world have to do, was becoming exhausting. By keeping separate, color-coordinated binders for your cash disbursements, cash receipts, bank reconciliations, grants (approved and denied) and payroll records, your audit at the end of your fiscal year will essentially be “self-service” for the auditors. They can find any documents themselves that they would usually ask you to gather. They can photocopy the documents they need for their records themselves and re-file them after they’re done instead of requiring your assistance. For example, we file cash disbursements in black binders with all applicable back-up documents (purchase order, packing slip, invoice and check stub) in check number order instead of by vendor (including voided checks). We file cash receipts/transfers in blue binders in date order, separated by which bank account they were deposited into, starting with the first date and ending with the last date of the fiscal year. Auditors typically ask for a list of checks and deposits and I really enjoy saying, “The binders are over there. Please help yourself to whatever you need.”
This is a great system that provides a “home” for every financial document, without having to think about where or how to file it. As your non-profit organization grows in budget, where more paperwork is created, you already have a system that is scalable to prevent feeling overwhelmed unnecessarily. Before creating the binder system, I found myself avoiding filing and feeling frustrated by how much work was literally piling up. Afterwards, I found myself itching to file/re-file every last document, since it had a “home” to go to.
What have are the three things your best-run charter schools all have in common?
1) Every decision is tied to the school’s specific mission. School leaders ask themselves before each decision, “How will this affect my students?” The discipline to ask this question before every programmatic and financial decision keeps everyone focused on student achievement. Superior academic performance will keep the school’s doors opened. The potential of charter revocation is a great motivator to keep a razor-sharp focus and avoid school closure at all costs.
2) ALL staff members are valued at successful charter schools, not ONLY teachers. Leadership teams invest a great deal of time to provide professional development to everyone and make sure they feel supported to succeed.
3) The best charter schools have really efficient finance and operations teams that are adequately staffed to serve their students and teachers. There is a high burn-out rate for front office and back office staff members because their workloads grow exponentially, even though schools usually grow linearly.
With the latest economic downturn, many of us need to watch our budgets even more closely. Where do you think organizations could scale down/reduce their budgets with the least negative impact on their operations?
This is a tough question. This is an unprecedented time and we don’t truly know how bad things will get before they are turned around. I recently learned about an organization, where they have a credit line that gets them through 6 months of expenses in between fundraisers. They are okay right now, but are concerned that their bank will no longer extend the credit line to them, which could have a drastic effect on the organization.
But no matter how you fundraise for your organization, you should be assessing every program, know the return on investment, assess impact on your mission and question whether it is worth the time, energy and money. For example, if you have an after-school program that is very expensive, stretches your staff to the point of burn-out and ends up feeling like baby-sitting instead of having a real educational value, then you might want to re-evaluate. I would question whether using those funds towards a tutoring program could achieve better results that could leverage student achievement.
Make sure you use all of your equipment. Be humble and question each purchase. Just because a computer is not the latest model or the desk may not match the rest of the furniture, you can still make good use of them, instead of worrying about appearances. My view is that you don’t want money from funders who base judgments on appearances over program quality/constituent satisfaction.
Also, keep an eye on frivolous spending and make the best use of every dollar. Pay close attention to cash because as they say, “Cash is king.” If you can avoid it, you don’t want to lay people off. That should be the absolute last resort. Even though that is the quickest way to reduce your costs, try tightening your belt first. You can cut expensive consultants if they are not performing as well as you had hoped, but be ready to handle the work they were doing. Establish a rate of return on fundraising consultants. At minimum, they must fundraise at least what they cost, but ideally, they are raising revenues of 3-5 times their fees. Look for volunteers or create low-cost internships to get work done.
Also, don’t forget to try to identify new sources of revenue. For example, charter schools can consider slightly increasing the number of students per classroom, as long as it doesn’t violate the terms of their charters.
Have you found any HR or Financial software to help your clients organize their operations?
We use ADP for payroll and QuickBooks Online for accounting with most of our schools. I definitely suggest that you consider using web- based software because you need the flexibility to work from home and not stress out that you lost all of your work because the server was not backed up or your laptop’s hard drive died. Be sure to have consistent internet connectivity though. Non-profits use Excel for many things, which is fine. When you are ready to transition to a database, you can upload data from Excel into it. Also, there are many inexpensive web-based backup services for laptops that are not networked. If you don’t want to invest in land-line phones and connect the staff member cell phones instead, where staff members are reimbursed for estimated usage, there is a new service to research. A main phone line can be established that automatically routes to your Executive Director’s cell phone if you press 1 and another staff member if you press 2. This is great if you have a team that works remotely, yet you want to give the appearance of having a virtual office.