Financial Storytelling: Captivating Stakeholders with Financial Results-June 2014

Financial Storytelling:  Captivating Stakeholders with Financial Results

Although spreadsheets are a CFO’s best friend, the stakeholders of a nonprofit need more than columns of numbers to understand a nonprofit’s financial story. Edward Mulherin, Founder and CEO of e-Cratchit, gave a presentation about innovative approaches to financial storytelling that will keep the attention and interest of your board, institutional funders and other stakeholder audiences. Edward is a CPA and a lawyer with over 30 years of experience in finance and accounting, first as an auditor and then, for the past 15 years, as CEO of e-Cratchit, which provides outsourced CFO and accounting, mainly web-based services, across the country to approximately 60 nonprofit companies.

Edward emphasized that you need to think of how to present the numbers in interesting ways to different groups. Different aspects of financial reporting are more important at certain times of the year than at others times. The main groups that a CFO will be presenting to are: Management, Boards, Funders, and Bankers. How you communicate and present the financials to the different groups is very important.

Here are some guidelines:

  1. Keep it simple.
  2. Each audience has a different point of view and different needs for information. Cater to those needs.
  3. Those needs change during the course of the fiscal year.
  4. Be proactive and predictive.
  5. Be conservative but accurate with forecasting.
  6. Remember cash is King and don’t forget the balance sheet.
  7. Remember to report temp restricted funds in an understandable fashion. You need to be in agreement with the Development department on the fundraising numbers.
  8. The Finance team needs to be in communication with the whole organization.

You need to be accurate when you predict the numbers, and then the Board and senior staff will have confidence in you. You can use words, colors, graphs, and numbers in your presentation. A graph showing the net bottom line over time is helpful in showing trends over the year and helps your audience understand any cycles in your organization.

Edward suggested that a seven (7) column performance report would be good; showing the actual vs. budget and any variance for the month, the actual vs. budget and any variance YTD, and the last column would be the annual budget. Dashboard reporting can sometimes be useful, including reports covering: census by program; A/R Aging, over 90 days A/R, and debt coverage. You should project cash flow at least 2 to 3 months out and should reconcile cash every week. You should be proactive and predictive with a rolling forecast, so that there are no surprises. Show how you are doing against budget and compared to last year’s actuals. Ed briefly described a matrix called the Sustainability Matrix which focuses your audience’s attention on the impact of programs on the agency’s finances and on the agency’s mission. When reporting internally on operating results, show the temporarily restricted funds actually released into revenue for that period. Be aware that audited financial reports may be different in format and audiences need to be informed accordingly. If you have different programs in your organizations, it would be good to do a P&L actual vs. budget by program and to forecast by program, and then have all of the numbers roll up into an organization-wide report.

Remember, don’t overwhelm your audience and keep your presentation simple.