Your Organization’s Financial Health

Your personal health and your organization’s financial health are the same in at least one way — serious problems could exist that you cannot see or feel. A sudden loss of income or an unexpected expense can stop the heart of your organization just like a medical crisis can stop your body. For your organization, like your body, monitoring a few key areas can alert you to problems on the horizon.


At a minimum, organizations should monitor financial health in these three essential areas:


  1. Actual vs. Expected Financial Activity

Financial performance information should be compared to planned, or budgeted, performance to determine how actual events compare to what you thought would happen. Focus on variances in significant income and expense categories. Obtain explanations for why the budget or plan was not met. Did conditions change?  Were projections unrealistic? Focus on “why” and use that information to refine budgets and plans.


  1. Cash Flow

Project your cash inflows and outflows for at least three months, preferably for six or more. Assess whether income that you expect to take in is going to cover the amounts you need to pay. Sounds easy, but this analysis takes some thought and effort. You need to know your payments receivable and payable, regular payments that are required no matter what, such as payroll and rent, and your reconciled bank account balances. Be realistic about payment timing and what it really costs to sustain your organization.


  1. Expenses

Maintaining control over spending is the most important and most difficult part of running an organization. Demands to fund day-to-day operations, in addition to investing in technology and infrastructure, are constant. Prioritizing essential expenses and growth investments is a challenge that requires regular attention. This is particularly true in newer organizations where infrastructure investments are most crucial.


Maintaining your organization’s health is a lot like managing your personal health. Monitoring a few key health areas can alert you to problems on the horizon, and give you an opportunity to act before it’s too late.





Health Savings Accounts

Did you know that you can fund medical expenses and save taxes at the same time? Tax rules include multiple programs providing tax advantages to offset qualified medical expenses. One of the most common and easy-to-implement programs is a Health Savings Account (HSA).


HSA contributions can be made by an eligible individual or any other person, including an employer or a family member. No permission or authorization from the IRS is necessary to establish an HSA with a qualified trustee, such as a bank or an insurance company.


What are the benefits of a HSA?


  1. Tax Deduction

You can claim a tax deduction for contributions you, or someone other than your employer, make to your HSA even if you do not itemize your deductions on IRS Form 1040. Contributions to your HSA made by your employer (including contributions made through a cafeteria plan) may be excluded from your gross income.


  1. Tax Free Rollovers to Next Year

The contributions remain in your account until you use them. The interest earnings on account assets are tax free.


  1. Tax Free Distributions

Distributions may be tax free if used for qualified medical expenses. Qualified medical expenses are expenses that would generally qualify for the medical and dental expenses deduction. Expenses incurred before you establish your HSA are not qualified medical expenses. State law determines when an HSA is established.


Who is eligible for a HSA?


Individuals eligible to qualify for an HSA must meet certain requirements, which can get pretty complicated. In general, eligible individuals must:


  • Be covered under a high deductible health plan (HDHP).
  • Have no other health coverage.
  • Not enrolled in Medicare.
  • Cannot be claimed as a dependent on another taxpayer’s tax return.


Need more details? The IRS has them for you at