November 2017: Using Nonprofit Financials as a Strategic Decision-Making Tool

Have you ever reviewed your internal or external financial reporting and questioned its usefulness to your stakeholders?  Many have asked this question but have struggled with how to enhance financial reporting to be more than just numbers—but a strategic tool for decision making.  In this session participants discussed best practices for financial reporting in an interactive environment and learned techniques and strategies to begin transforming today’s financial reporting into an effective decision-making tool.


Write-up from the Session:

Tim Warren, CPA, a principal in the nonprofit group for CliftonLarsonAllen, gave a presentation on using financials as a strategic decision making tool for nonprofits. CliftonLarsonAllen   does wealth advisory work, outsourced services, and audit, tax, and consulting work. The firm works with approximately 400 nonprofit organizations in Massachusetts.

One of the main roles of the modern CFO is to be one of the chief storytellers for an organization. The CFO can use his/her access to the data and skill set to tell the story of the agency.  The story should probably not start with the numbers.  It should start with reporting about the organization’s strategy – what it is doing, what is it looking to accomplish, and how is it going to do that.  The CFO needs to translate the story of the 990 back to Agency management and show them the impact of the 990.  The CFO also has to keep the Board of Directors engaged.   Some of the issues that the CFO faces when telling that story are as follows:  1) does the CFO have the capacity to do this; 2) CFOs often struggle with using the appropriate graphics; 3) trying to communicate too much information; and 4) a lot of organizations are just used to seeing and hearing about the numbers and bottom line, not a story.  The story has to include both financial and nonfinancial information.

The story that the CFO tells should start with a focus on the purpose of the presentation. Who is your audience and what is important to them.  Identify the financial and nonfinancial data that is important for your presentation, and finally select the best presentation techniques (not just the Statement of Revenue and Expenses and Balance Sheet).    You may be presenting the same information to different audiences, but you can present it in different ways.  Tim suggested that you can create one PowerPoint template that you can use for all audiences, but use new data as it occurs.

The CFO should explain how he/she is advancing the strategic plan of the organization – meeting the goals and supporting the mission.   Identify a few key performance indicators that help tell your story.  You need to be strategic, define your audience, choose a business model and key performance indicators, and then plan the presentation.  You need to give a quick snapshot of the financial health of the organization.  The story must address the past, the current situation, and the future.  Show how the agency performed against budget and how it did compared to the previous year at the same time.   You can use a bar graph to help with the presentation.

To summarize, the CFO needs to become the story teller of the nonprofit organization. You should always start you planning process by asking the audience what is important to them. When developing financial reporting start with the key strategies of the agency. Then you should ask yourself, how you can address those issues and what you can change or do differently to improve your presentation and keep the audience engaged.  Finally, use the output of the reporting to make decisions on the direction and strategy of the organization.

Materials: Financials as Strategic Decision Making Tool