“This week’s Ask Manny question comes from Heather.”

Question:

I’m on the board of a non-profit. The Treasurer and Executive Director present a financial report to us every month at our board meeting. The financial information definitely seems important. However, I’m not sure what to do with all of this important information they are giving to us. What should I be doing?

Answer:

Sounds like you are experiencing a lack of direction when it comes to the financial report. This is a classic mistake that I see occurring over and over again. Particularly with people less experienced with financial reporting.

Let’s step back and first understand the purpose of the financial report. Why do you, as a member of the board of directors, receive a report event month on the finances of the organization? To help make decisions. Your role as a board member is to make decisions that will continue to steer the organization in the “right” direction. This includes (amongst other things) ensuring that the organization has the financial resources it needs to fulfill its mission.

The financial report should be explaining to you the status of these resources. Do we have enough? Are we spending on the proper resources? Are we generating enough funding to cover everything? Do we have enough reserves to weather a potential downturn? Etc.

Your financial report may be giving you all this information. But… here’s the key… it also needs to tell you want to do about it. There needs to be action steps tied to it.

If everything looks great, then the action step could be to do nothing! Don’t change anything. Deciding to hold the course is, in-fact, an action. And it can be a very important action for the board to take from time-to-time.

Now, if things are going really well financially, perhaps the recommended action is to take excess funds and do something “productive” with them – invest in something for example.

If things are not going well, then this is where several actions could be suggested. Do we shave off some expenses? Spend more on communication efforts to increase donations? Hold an additional fundraiser event? Increase membership fees?

By providing these action-oriented suggestions, the financial report is transformed from a dry document that spews out facts and figures, into something exciting that we can debate and discuss and use to move the organization forward. Clarity is formed when we see the information that is presented and the clear action steps that we need to take as a result. The role of the Treasurer or Executive Director should be to always provide a report of this caliber.

If your organization needs assistance in preparing action-oriented financial reports, please reach out to us! Our Fractional CFOs are experts at crafting useful reports, and even presenting them to your board during a meeting. Book a consult and let’s discuss!

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