4 Signs Associations Need to Strengthen Their Financial-Planning Muscles

A few months ago, I tried my first barre class. Before heading into the ballet-inspired fitness class, I thought that I was in pretty good shape, but the extreme soreness I experienced a few hours later proved otherwise. Clearly, some of my muscles had been neglected.

Financial planning is similar, according to Hilda Polanco, founder and CEO of FMA – Fiscal Management Associates, LLC. Developing strong financial-planning tools and processes (i.e., strengthening the financial planning muscle) is key to being successful in an ever-changing world.

“A budget … as soon as it is approved, needs to change, because the world is changing,” Polanco said in a podcast  (opens in a new tab). “And it’s really hard to predict exactly what will happen, so budgets change, and the planning function is what organizes those ideas as things change …”

Although associations may think their financial-planning muscles are strengthened and toned, but here are a few signs that they might need a little more conditioning:

You can’t imagine revising your annual budget. After creating the annual budget and getting board approval on it, is your organization willing to revisit the budget with the intent to revise it? “If someone feels that it is way too painful to revisit the budget a second time—if you are feeling that, it’s time to build a better planning muscle,” Polanco said.

You can’t imagine responding to unforeseen opportunities. “Sometimes changes bring opportunities that weren’t contemplated when the budget was originally developed, so if the organization feels somewhat limited in taking on new opportunities because they weren’t what they originally planned, that’s also an indication,” Polanco said.

You can’t imagine creating different budget scenarios. “If your budget tool is static, and every time assumptions need to be revisited, it means redoing the budget, that’s an area of opportunity,” Polanco said in the podcast. Associations want to build dynamic tools that allow them to quickly see the impact on the budget if they were to, for example, add new staff roles or offer wage increases to employees.

You can’t imagine approaching your board with a revised budget. “The board could say that ‘we’re never going to change the budget,’ but reality is going to happen, and if life is happening under different circumstances, management has to respond to and navigate those new circumstances,” Polanco said. To that end, the association might need to educate its board on the need to revise a budge. “In planning, the goal is for the board and management to be as closely aligned as possible in their ability to predict the future,” Polanco said. Generally speaking, six months into the fiscal year is the time when associations can start seeing whether there are significant changes—and it’s important that both the board and management are on the same page when it comes to addressing those in the budget.

What are the indications you’ve seen that might mean that your financial-planning muscle could use some strengthening? Please leave your comments below.

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