Demystifying Financials: What to Look For, What to Ask

 In Association Management

Do you know where your association is headed? The answers lie in your financial reports. But what if you’re a volunteer board member who isn’t a whiz with numbers? You can still overcome your fear of figures and help your organization chart its path forward.

Your financial reports serve as more than a historical record. True, the number-filled document includes a wealth of information about your past. It tells your board how much you spent, and where. It relays how much money you took in, and from whom. Used correctly, though, financial reports can empower you to plan your future.

But how do you put together an effective, useful report? It’s all about asking the right questions. Then, it’s about putting the answers together with the right amount of detail. Frontline holds nearly two decades of association management experience under its belt. We’ve learned a few things that we’re sharing with you. Read these tips and use them to make your financial reports the powerful resources they can be.

Choose your frequency
How often do you need a report? Some associations produce monthly reports. Others find quarterly reports fit their needs. As long as you establish regular reporting periods and hit those marks, you’re in good shape.

Provide enough detail
Your report should contain enough detail, but not too much. Your board should be able to understand how you’re receiving and spending funds. But with too much information, the document becomes unwieldy and unmanageable.

Clearly organize the information
Organize your chart of accounts by program areas and it will be easier to digest. It helps board members determine how much they’re spending on each department. What’s more, it can be used for strategic planning and tax returns.

Use your software
Any accounting software worth its salt offers financial reporting capability. You should be able to tailor the information to suit your organization’s particular needs. Again, provide detail but not so much it becomes overwhelming.

Actual income and expenses
We always recommend boards regularly review two reports at a minimum: the balance sheet and a budget performance report. It’s important to look at actual income and expenses, compared to the budget. You can’t afford to wait until the end of a fiscal year to uncover a problem.

Accrual vs. cash
Determine what will work best for your organization and stick to one type of reporting. Accrual accounting records transactions when they occur, rather than when a payment is made or received. This might be more complicated than cash accounting, but it gives a far more accurate picture.

Ask your staff
Your team can provide insight that someone not in touch with day-to-day details can’t. If you’re not sure about something, ask your staff. They will be able to shed light on the “why” behind the numbers. Maybe an event went over budget because of a thunderstorm or you needed to invest in new equipment. Keep in mind if you’re not sure about something, the rest of your board probably isn’t either. The staff just might have the answers.

As a board member, it’s your duty to make decisions based on the best financial data possible. It can be complex and challenging, but immensely important in planning your association’s future. Need help? Ask the experts at Frontline. We’d love to help you make sense of the numbers, and share with your board.

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