Glen Swanson, TD&T Assurance Manager, provides ideas on how to help those outside of the finance office gain a better grasp on your organization’s financial reports.
When presenting financial reports to your board or to staff outside of the finance team, do you find a lot of drooping eyelids and confused looks? Unfortunately, many individuals will tune out when financial reports are given because they can’t relate to the information. As a resource for many nonprofit organizations, we at TD&T come up against this issue frequently. During a recent parent teach conference, our kids’ teacher mentioned something that reminded me of this.
If asked verbally, young kids will be able to do simple math problems – “I’m holding two fingers up behind my back and I just put one more up. How many fingers are up now?” However, if the same kids are given a piece of paper with “2 + 1 = __” on it, they will be clueless. Apparently, this disconnect is quite common, and it relates to how their brains process the problem. Until the kids have been given more instruction and opportunity to learn, they won’t be able to master math problems on paper.
The ways kids get lost in the “technical” terms of a written math problem may give some insight into how those outside of the finance team feel about the financial reports they’re given. Individuals outside of the finance team are more than capable of comprehending the financial condition of your organization. However, if we only offer them highly “technical” reports, don’t be surprised if the results are less than desired.
This by no means diminishes the skills or knowledge of those outside the finance team – they have been given greater strength in other areas of your organization. So how can we help bridge the gap of financial information to nonfinancial individuals?
While you may not be able to eliminate all the potential miscommunication, here are five tips to help you improve:
- Use “plain English.” Accounting lingo will cause others to focus on interpreting what’s being said rather than understanding the financial reports.
- Rather than assets and liabilities, talk in terms of what we own and what we owe to others.
- Instead of referring to temporarily restricted contributions, refer to gifts where donors have said how we need to use the funds.
- Don’t call it a statement of financial position. Call it your balance sheet, or even better, a summary of what we own and what we owe.
- Avoid data overload. I get it, we’re comfortable with all the financial reports we’re providing, we understand it all, and we think it’s all critical. Those outside the finance team may not view it the same way though.
- The more we include, the more technical it will become.
- On financial statements, use broad categories that help keep readers focused on the big picture items they need to watch.
- Take it as a compliment if someone requests more detail. It means someone read what you gave them, and understood it on some level!
- Provide financial training to the board members and employees who would benefit.
- Training can be a part of board orientation, but also do it on an ongoing basis. The more times we hear something, the better we learn it.
- Partner with other nonprofits in your community. While the specifics of your organizations may be different, there will be overlap you can draw on.
- If desired, TD&T would be glad to provide training – ranging from one on one meetings to formal board training programs.
- Provide context for the numbers.
- Help readers to know what financial health looks like for the organization. If they know this, they’ll be better able to focus their efforts on the most important items.
- Remind readers of the big picture goals and objectives of the organization. This will help tie the financial info into the operations.
- Use the financial numbers to aid in decision making. The more of a habit you make this, the more natural it will become for everyone.
- Seek out feedback.
- Ask if the financial information is meeting users’ needs. Remind everyone that the objective is to make the information understandable to everyone.
- Many people are afraid to say they don’t understand a report, seek out responses to gauge if everyone gets it.
Hopefully these tips will guide you in creating financial reports that make everyone’s eyes light up, instead of drooping eyelids when the financials are brought up. Or, at least lead to more knowledgeable discussions on your organization’s finances.
TD&T would be glad to provide training at whatever level you may need. We certainly know and understand the financial operations of nonprofits, and enjoy finding ways to make that relatable to individuals with all levels of financial knowledge. Give us a call today!