What Board Members Need to Know About Financials

What Nonprofit Board Members Need to Know About Financials

As a board member, you’re expected to use your skills and experience to help the organization achieve its goals. For nonprofits, that usually involves raising money. For any organization, it likely means providing management and oversight, assisting in specific areas of operation, and helping the organization through transition periods.

A key piece of all these endeavors is understanding the organization’s financial position. Without timely financial information, it’s simply not possible to monitor progress or make informed decisions about the future of the organization, not to mention the fiduciary responsibility of every board member.

The Numbers Board Members Need

Each year, every nonprofit board member should receive IRS Form 990, which provides broad information about the organization’s mission, programs, revenue sources, and more. Form 990 is only the beginning, however, as board members also need monthly or quarterly updates on the organization’s financial information, typically provided in the form of:

• Statement of financial position (balance sheet)
• Statement of activities (income statement)
• Cash flow forecast
• Actuals versus budget
• Other operational figures

If you are not receiving timely financial updates from staff, ask why this might be. If time or reporting capability is an issue, the organization should look in to upgrading to better financial software.

How to Make Metrics Meaningful

Reviewing the financial statements on a regular basis is the first step. The second is making sure that the reports you are receiving are easy to understand, relevant, and concise. Most board members do not have extensive financial or accounting expertise, and you shouldn’t need to! Ask your staff to think about the following when providing their board reports.

When possible, graphs should be used in lieu of tables of numbers or detailed line items. Trends should be shown, providing continuity between one report and the next. It’s also helpful to provide some explanation around significant items. For instance, the report might point out places where there is significant variance between expected and actual outcomes, and explain why that’s the case.

Ideally, organizations should be able to customize their dashboards to quickly provide the most relevant information to board members. Leading cloud-based accounting software solutions such as Sage Intacct provide powerful report visualizations, as well as real-time reports that make it easy to drill down to the details that matter.

The latest software makes it possible to view project profitability and other up-to-date metrics at a glance, as well as to easily flag trends, key comparisons, missed or hit targets, outliers, and other information that can give board members more helpful insights into the organization’s financial well-being.

Do You Have the Details You Need?

Even if you don’t serve on financial or accounting committees, as a board member you have a responsibility to know the financials of your organization. Insero & Co. has decades of experience working with nonprofits, businesses, and their boards. We’ll make sure you have the real-time, detailed, and easy-to-use financials you need to make the right decisions to move your organization forward. Contact us to learn more.