finance reportsThe previous posts have discussed budgets, reconciliations and cash flows and unless you have a finance or accounting background some or a lot of this may not be understood or even appreciated.

As a board member it is a key responsibility to understand the financial aspects of the organisation, so how this information is presented can be critical.

Often a lot of finance reports are presented and include the profit and loss statement, balance sheet, cash flow statement and possibly even transaction listings and account reconciliations.

While these are important, often there is no explanation as to what they mean because the volunteer treasurer assumes they are understood.   Therefore, one way to add value to the finance reports that contain lots of numbers is to prepare a written report that provides an explanation.

Some examples include:

  • A comment on the overall performance of the organisation for the month as well as on a year to date basis and how it compares to the budget.
  • Reasons for any significant variations that may have occurred.  For example a 2% variation on a $500,000 amount is more significant than a 70% variation on a $500 amount.
  • An overview on the performance of key revenue and expense items against budget.  For example, if there are significant variations in donations, grants, membership or enrolment fees then explain why they may have occurred.
  • If key performance indicators are used then explain whether they are being met or why variations have occurred.
  • Provide an explanation in relation to any large or significant transactions that have occurred or if they are above a certain dollar limit.
  • Comment on the solvency of the organisation that is linked to cash flow forecasts.
  • Provide a listing and explanation of any significant finance events such as, for example, a large purchase, grants to be received from a funding agreement or details of a large donation. 

Again, these are just some examples, but the important point is that you are clarifying a lot of potentially confusing or hard to understand information in the numbers of the financial reports by providing a written explanation.

This shows you how to add value to the finance reports. It not only raises the financial awareness and understanding of the board but should result in more effective decision making.