The CFO'S Perspective

Understanding Nonprofit Reports & Reporting Best Practices

At any nonprofit organization reporting tells the story of what is happening and why. But reports are not simply a snapshot of where the organization is today. They are a critical piece of information to predict where the organization will be tomorrow.

All nonprofits do some combination of financial reporting, management reporting, and board reporting. Internally these reports help organizations manage risk, evaluate current efforts against performance objectives, make strategic operational decisions, and prepare for what is coming next. Externally these reports communicate with key stakeholders and rally supporters. As such, reporting is extremely important for any nonprofit organization.

Topics: Non Profit Organizations Financial Reports

4.5 Presentation Tips for CFOs – Delivering Excellence

As a CFO you live in the numbers. And like Neo in The Matrix, who can see falling green lines of computer code and read them to construct a picture of the world around him, they make sense to you.

However, when you sit down to present to your CEO, COO, CTO, CRO, CMO, or any other c-suite executive, you need to understand that they may not have the same affinity for numbers that you do. This is especially true when the executive leaders you are presenting to are less financially savvy or new to their roles or the industry.

When “non-numbers-people” see numbers, typically all they take away from it is the numbers themselves. However, when “numbers-people” see numbers, they see the whole picture – the story that the numbers are telling, how the metrics are related, and how they fit into the larger framework.

Knowing how to present to your audience is key in bridging the gap to move the business forward.

Topics: Financial Reports CFO Responsibilities

Understanding Nonprofit Functional Expense Allocation

Nonprofit organizations are required to report functional expenses either in footnotes, the Statement of Activities (SOA), or a separate Statement of Functional Expenses (SOFE). The goal of this functional expense allocation is to illustrate the relationship between program expenses and supporting expenses to better understand how those supporting expenses further the organization’s mission. And while this sounds easy enough in concept, some expenses can be difficult to classify.

To complicate matters, functional expense classifications can change over time. Like a for-profit business, a non-profit organization’s operations can change year-over-year, requiring that functional expense allocations be regularly updated to keep up with current activities. Otherwise, expenses can be misrepresented or fall through the cracks, resulting in misrepresentation of the organization to key stakeholders like grantors, donors, and boards of governors. Management also relies on functional expense information accuracy for strategic planning, making it critical to the day-to-day operation of the organization.

Topics: Non Profit Organizations Financial Reports Expenses

Are You Getting Enough Information From Your Financial Statements in These Turbulent Times?

In the last six months, we have seen unparalleled increases and decreases in sales and production volumes. Are you getting enough information (and the right information) from your Financial Statements to make good management decisions in these turbulent times?

The most complex segment of the financial statements for manufacturers and the most volatile in these changing times is the cost of goods sold. The different income statement formats and content significantly impact its usefulness for managing significant volume changes.

Let's look at the various formats of financial statements from using a small manufacturer as an example and review how they might or might not help in decision making.

Topics: Financial Reports Budgeting

Financial Projections for Startups – A How-To Guide

Financial projections are a critical component of a sound business plan. These projections (or “financial forecasts”) are used externally to obtain funding as well as internally to create a strategic growth roadmap with key milestones.

At the core of these projections are logical assumptions for revenue, COGS (cost of goods sold), SG&A (sales, general, and administrative) expenses, capital investments, and cash flow that serve as building blocks for the final figures that result. Because your financial projections rely on these pillars, it is crucial to find a balance with these inputs. Being too conservative or too aggressive with your assumptions will skew the resulting projections, damaging their overall credibility. The goal is to inspire confidence externally as well as internally while maintaining high ethical standards, which requires a balanced approach toward creating assumptions for financial projections.

Use existing financial information, even if it is limited by the newness of your business, to justify these assumptions and inform your financial forecasting process. Your resulting financial projections should include a P&L statement, cash flow statement, balance sheet, capitalization table, and strategic investment plan.

Topics: Funding Planning Financial Projections Financial Reports Forecasting Financing

Which Financial Statements are Required to Get Funding?

Lenders and investors will always ask for financial statements as part of the application process. When applying for funding, you will be required to provide both historical financial data and projected financial figures. Banks and investors will then analyze where the company has been and where it appears to be going to determine if its trajectory fits within acceptable risk parameters.

Topics: Funding Financial Reports Financing

Beyond GAAP – Financial Reporting for Nonprofits

GAAP compliance in financial statements is an essential underpinning for nonprofits and for-profit businesses alike. It is essential to be in GAAP compliance for audits, funding applications, etc. However, the standard GAAP financial statements may not be enough to ensure your statements will match your cash position at the end of the month. Additional perspectives are required to quickly assess the organization’s financial performance.

Topics: Non Profit Organizations Financial Reports gaap

Understanding New Revenue Recognition Guidelines for Nonprofits

For many nonprofit organizations, revenue recognition is one of the most challenging accounting issues they encounter.  The guidelines governing the recognition and classification of revenue are now, however, undergoing significant change.

Topics: Accounting Non Profit Organizations Financial Reports Audit