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Financial reporting tells how your nonprofit is doing, sparks talks, and helps the board of directors do their job effectively.
Your board of directors is one of your nonprofit’s most valuable assets.
They’re typically very committed volunteers who have a passion and a connection to your mission, and they bring knowledge, experience, and connections to your organization. This makes them not only strong advocates but strategic allies, helping to shape outcomes and drive organizational sustainability.
The board of directors plays a crucial role in the financial management of nonprofits and is charged with approving budgets, establishing the availability of adequate resources, and monitoring financial performance — as well as maintaining compliance with applicable laws and regulations.
The financial reporting package provided to the board can be a great way to tell your financial story, engage your board in strategic discussions, and help them fulfill their responsibilities.
7 tips for engaging board members with financial reports
Here are few key strategies your nonprofit can use to help make your financial reports stand out:
- Understand what drives your nonprofit and meets the needs of your board, which is most often a combination of financial and non-financial metrics.
- For example, a nonprofit serving the community will track number of clients served and the costs associated with doing so — while a foundation may track number of donors and the average donation received.
- Identify and speak to the key performance indicators (KPIs) that quickly determine if your organization is on or off track. Pick the three or four most important KPIs to maintain focus on what matters most.
- Comparison to historical data can help identify trends, evaluate current performance, and drive informed decision-making.
- Comparison to budget allows your organization to monitor performance and identify variances that may signal the need for adjustment or action.
- Incorporating forecasted information can aid decision-making, facilitate planning, and support transparent communication.
- Use narrative explanations to provide context and clarity as well as highlight trends and improve transparency.
- Be sure to include charts and graphs that show your organization’s financial picture in a clear and concise manner, as this may enhance understanding, improve readability, and highlight trends.
Keep your organization going strong
New board member orientation and annual board workshops can be a great opportunity to help board members understand your organization and learn about your KPIs. These are also opportunities for your organization to get to know your board members, their backgrounds, and their preferences when it comes to financial reporting.
Nonprofit organizations can use this as a basis for developing strong financial reports that add clarity and transparency as well as drive timely and effective decision-making with the goal of supporting organizational sustainability.
How we can help
CLA's team of experienced professionals work with nonprofit organizations to drive board member engagement through the development of customized financial reports, board workshops, and training sessions — as well as offering guidance and leading practices through tailored strategies that meet your organization’s needs and help you achieve your goals.
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