Is My Organization Financially Healthy?
Community housing providers find themselves in an exciting time of historic government investment in our sector and a spotlight on affordable housing in Ontario. At the same time, we are also facing the challenges of end of operating agreements/mortgages and heightened expectations and requirements from funders. Now more than ever we will need sound financial oversight.
So how do you know if your organization is employing good financial management? Here are a few indicators.
A Well-Prepared Budget
Your budget should be a projection based on past financial performance and expectations of what the year ahead will hold. A good budget begins with good planning. Short-term (one year) and long-term (one to 15 years) assessments of property maintenance and capital replacement needs must be considered before the beginning of the fiscal year. This helps to create a budget that works.
Adequate Cash Flow
To ensure you have enough cash to pay the bills, cash flow analysis is critical. The analysis will identify periods of negative cash flow, allow for planning to prevent shortfalls and ensure that bills get paid on time.
Low Vacancy Loss
Low loss of revenue from vacancies is a good indicator that your market rents are set at a competitive level, tenant satisfaction is high and your process for filling vacancies is timely and efficient.
Low Arrears and Bad Debts
Arrears are rent and other receivables that are overdue. Bad debt expense is a combination of arrears that are no longer collectible and allowances for current arrears. If you don’t collect arrears before a tenant moves out or fail to follow-up after the move, this can have a significant negative impact on your amount of bad debt. Low arrears means lower bad debt. This is an indicator that your organization is being diligent in your collection procedures.
Sufficient Capital Reserve Funds
Having capital reserve funds available when you need them means:
1. Having sufficient funding levels
2. Getting the best possible value for money for repairs
3. Carefully planning for preventative maintenance and use of reserve
You can find out more about healthy financial management from ONPHA’s latest resource Financial Policies and Procedures Handbook.
Financial management can seem like a daunting task, but it doesn’t have to be complicated. ONPHA is offering new resources to help. Just released, ONPHA’s Financial Suite of Resources is a community housing provider’s go-to source for building financial literacy across their organizations.
Newly available resources include:
- A comprehensive Financial Policies and Procedures Handbook, with 20+ customizable tools and templates
- Four updated infoONs (exclusive for ONPHA Housing Members) with helpful instructional overviews on bookkeeping best practices, internet banking, investment policies and tendering for an audit
Visit ONPHA’s website for more information.