Five Ways to Bring Life to Financial Reports
By Glen Swanson, CPA
As the financial report is given at your monthly board meetings, what is the atmosphere like? Are all the board members excited and leaning into the conversation? Or are their eyes glazed over as they lean back and think about anything else?
Unfortunately, too many boards fall in the second category – checked out when the organization’s finances are discussed. For any organization to operate at its highest level, it needs effective board oversight. And a common thread running through financial frauds at nonprofits is a lack of effective board oversight. Given the importance of board oversight, every finance director should seek to make their financial reports meaningful and impactful. Here are five tips to assist in doing so:
- Use visuals. Charts and graphs, along with simple narrative text, will go a long way in conveying the story. There are tons of inexpensive (including many free) tools that will help you create meaningful data visualizations. Explore these options to see what will be effective for your organization and board.
- Measure and report on your key performance indicators (KPIs). Work with your management team and board to determine the key inputs into the organization’s success (both financial and programmatic). As you discover those key inputs, think about how you can measure them and report on them monthly. For example, if you have significant reliance on contributions, measure and report on how many prospective donors your development team has contacted in the month.
- Less is more. Keep your reports simple and to the point. Avoid accounting jargon and use “plain-English” language instead. Doing so will focus the board on the story you’re telling, not just trying to understand what you’re saying. Instead of reporting on everything that happened in the month, pick a few important items to focus on. Too much information will lead to data overload and the board won’t connect with any of your points.
- Explain the why behind budget variances. And not just what the budget variances are. Most financial reports I’ve seen include a summary of budget variances, but unfortunately many do not have any analysis of why the variances exist. Focusing on the why will help board members better understand what happened in the month.
- Use each presentation as a teaching opportunity. Doing an annual in-depth financial training session is a great idea in theory, but they commonly don’t have the expected benefit. A more effective alternative is to give the board small doses of training each month. Did you receive a large restricted contribution this month? Take 5 minutes to explain what a restriction is, how it appears in the financial statements, and how the release of restriction will be reported when the purpose is satisfied.
Hopefully, this has you thinking of at least a couple changes you can implement for your organization. Admittedly, it will take some extra effort to rework your financial reports, and the board may take a little convincing. However, before you know it, you’ll find board members looking forward to hearing about the organization’s finances. Our Non-For-Profit team has significant experience with nonprofit organizations and would be happy to assist you in bringing life to your monthly financial reports.
Glen Swanson, CPA | Assurance Manager