The ultimate goal of providing an organization’s board with financial reports is to help them understand where the organization is and where it needs to go. Unfortunately, it is a common struggle when reporting to strike the right balance between providing meaningful, comprehensive information and being engaging to your readers. Below are some tips on how to accomplish both when presenting essential financial information to the board.

Provide Training

Every board member needs to understand an organization’s financial information to make informed decisions. However, board members bring different skills and talents to the table, and not all are going to know how to read and use not-for-profit financial statements and reports. As such, it is a good practice to provide training to new board members as part of the on-boarding process. The training should include an overview by the CFO of key financial reports, goals, and strategies. In addition, CPA firms, law firms, and other third parties will often provide board governance training as it relates to understanding not-for-profit financial matters. These could be valuable opportunities for board members to learn about their role and better fulfill their fiduciary responsibilities.

Focus on the Big Picture

The most common mistake in board reporting is providing too much data. Keeping it simple helps board members focus on the big picture when making strategic and operational decisions. Providing too much detail can be overwhelming to board members and lead to micro-managing the day-to-day decisions or going down unnecessary rabbit holes. As the CFO, however, you should always be prepared with detailed information in the background to answer questions and provide clarity.

Be Creative, but not with Numbers

The financial information provided to a board should be transparent and accurate, but it also needs to be tailored for their needs. Ideally, financial reports provided to the board should be readable in five minutes or less. Thoughtful consideration must be made to determine what information is most important to convey. The final report should correlate to the overall mission and goals of the organization.

At a minimum, board reports should include the following user-friendly financial reports at a summary level:

  • Statement of Financial Position (Balance Sheet)
  • Statement of Activities
  • Actual results to budget
  • Cash flow projections

Many board members may find that visuals such as dashboards and graphs are easier to understand and provide more meaningful information about the current financial picture. Providing trend analysis, key ratios, and industry benchmarks are also important financial reporting tools. Management should work with the board to determine what key financial metrics and indicators would be most relevant to them for dashboard reporting. Financial statements and reports should be prepared and distributed at least one week prior to the meeting to give them time to review.

Include a Narrative

Providing an executive summary is an important component of the reporting package as numbers alone don’t tell the whole story. The narrative should highlight management’s interpretation of the current state of financial affairs, including any accomplishments, as well as potential red flags or concerns. It should also explain any significant new items, fluctuations from budget and the prior period, or changes to key metrics.

Whether you are preparing or receiving the reports for your not-for-profit, ensuring that relevant information is communicated in a concise and understandable way will go a long way towards fulfilling your fiduciary duty to govern the organization well.

© Clark Nuber PS, 2018. All Rights Reserved

This article contains general information only and should not be construed as accounting, business, financial, investment, legal, tax, or other professional advice or services. Before making any decision or taking any action, you should engage a qualified professional advisor.