I once held a conversation with an Executive Director of a nonprofit. When I asked about her financial projections, her forecast for the rest of the year, she said, “I am not going to do that. I cannot spend any of my time dealing with financial numbers. I have too much other stuff to do.”

This, of course, left me dumbfounded. The process of management, especially top management, includes planning, organizing, staff, directing, and controlling. (See Koontz and O’Donnel, Principles of Management.) Once you have organized and staffed, planning, directing, and controlling are the ongoing activities.

A wise old executive once told me, “The daily function of management is handling variances.” That means that you have a plan, that you can measure performance against that plan, and that you can forecast the impact of the variances on future results. And NEVER, NEVER, NEVER run out of money!

Here is a tutorial on how to manage an organization with financials. This is an example of a Homeowners Association.

The first step for an HoA (Homeowners Association) is the calculate the revenue. Our policy is that we will annually increase the monthly assessments near the rate of inflation as calculated by the Bureau of Labor Statistics. The example shows a value of 8.6%. We multiply the assessments by 1.08. We will update this as we get closer to the November Annual Meeting. We do not budget for odd revenue amounts such as interest income or late fees. Both of these are very small…noise levels.

Next, we plan the projects for the next year. Remember, we are still planning what we want to do, not budgeting. Create a list of potential projects. I recommend that you query the board and staff…or brainstorm. Just come up with a list.

Then run each item through the left side of the following checklists. I am showing the criteria our association uses. I personally weigh these 5-4-1. Yours may vary. If the total is positive, add it to the potential projects list. If not, delete the project.