Financial Reports that Will Not Make Board Members Fall Asleep

by Kristen T. Hoyle

Financial reports are rarely scintillating reading and are often looked at by board members as a necessary evil. Who wants to count beans when they have the very important task of saving the world? Even a C.P.A. like me dreads these reports and winces as a well intentioned treasurer drones on about budgets and line-by-line expenditures. At the end of such a presentation, no one remembers any details and is usually buried in paper. It is imperative, however, that the financial report become a tool to inform board members about how the organization is doing and if they have the resources to continue. Often, decisions are made without any current or relevant information.

I have had the unique opportunity to create financial reports for boards from two different views – first as an external auditor and second as a treasurer. While content may change between these sets of statements, the overarching principles are the same. The two most important principles are: “Keep It Simple Sweetie” and “Know Your Audience.”

Keeping it simple is probably the hardest to achieve. On one hand you don’t want to bury a board member in minutia, but on the other hand you want to give them all the information they need to make a properly informed decision. What I find works the best is to have a summary or “dashboard” of all the information to be discussed. This should be a one page report handed out to every member. Everyone should know that detail is available if they want to look at it. While every organization may have different focus areas, the following are items every dashboard should cover:

  1. Cash and Investment Balances. You should report the reconciled bank balances as of the most recent month end. These balances should be no older than 30 days – if any older, you are working with outdated information.
  2. Aged Accounts Receivable and Payable Balances. Most board members think strictly on a cash basis. However, the only way to properly plan is to know how what the current cash inflows and outflows are.
  3. Aged Pledges Receivable Balances. If your organization is fortunate to have long term pledges, a total of the amounts due in the future years will help with long range planning. You should also note any allowances for doubtful pledges.
  4. Debt Balances with Due Dates and Rates. Everyone would rather spend money on programs than mortgage payments and lines of credit; however, if refinancing is looming or payments become crushing, you will need to act quickly.
  5. Total Revenue Over/Under Expenses. You need to know how your day to day operations are doing.
  6. Summary Budget Variances. A variance report based on major revenue and expense is usually the most helpful if you have month-to-date, year-to-date, and a prior year comparison.
  7. Restricted Cash Balances. Donors often give contributions for specific purposes - The Organization is legally obligated to spend the money only on those purposes. If you don’t keep track of this, you could end up accidentally spending the money on operating expenses.

Knowing your audience is simply a matter of tailoring your report in the following ways.

  1. To the board’s level of accounting knowledge. Some boards are quite sophisticated and will understand derivative financial instruments and want to talk about their risk levels. Other boards will think that G.A.A.P. is a place you buy jeans and not a method of accounting. So if your board is the former, throw in the extra detail. If your board is the latter, pare down your dashboard to the bare bones.
  2. To the organization’s unique mission. A food bank will want to know what the walk in rate is so that they can main adequate food stocks. A business league will want to know the membership level so that dues revenue can be projected for the next year. Every organization has one or two key statistics that are vital. Once you determine these statistics, it is important that they be verified and current.

In conclusion, remember accounting can be fun (yes I said it) and don’t be afraid to try something different in your reports. Keep it simple and know your audience, and your board will appreciate the results.

Bottom Line: Financial reports do not need to be boring or confusing. Concise, straightforward and informative financial reports can make your board…and auditor…happy.

Kristen Hoyle, CPA, oversees the audit division of a premier public accounting firm and specializes in services to non-profit entities and HUD audits. Ms. Hoyle has also served as the Treasurer and a Board Member with multiple nonprofit organizations.

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