Are you hopelessly daunted by your organization’s financial statements? Do you worry about showing them to your board or your funders, unsure of their reactions? Fear not; on December 8, nonprofit financial analyst Elaine Grogan Luttrull visited the Foundation Center's New York library/learning center to explain how you can relay your financial information in a way that accurately explains your nonprofit’s work, showcasing your best attributes and illuminating any areas that require special attention.
Ms. Luttrull has provided us with a series of valuable presentations on nonprofit finance and accounting this year – here you can listen to her panel presentation on Budgeting for Those Who Would Rather Not - and this month’s offering gave our audience a helpful perspective on making the best possible use of financial information in nonprofit communications. Her seminar was titled Your Organization’s Financial Statements: The Stories They Tell and below are a few of the discussion’s highlights.
How can you quantify the work that you do? As a nonprofit entity, you know that your bottom line is a social one more than a monetary one; it’s more a question of how many people you’ve helped over the course of a year, rather than how much money you’ve made. However, the extent of your mission-related accomplishments are also reflected in the numbers on your balance sheet, for better or for worse.
Review your statements to see what ratios and trends are revealed over time.
- How much cash do you have on hand, and how many days’ worth of expenses would it cover?
- How much debt do you have?
- How much income, and what kinds of expenses?
When you see these numbers, think about how they came to be, and what the numbers might say to someone as they read through your statements.
- Is your nonprofit growing or contracting?
- What kinds of things have you accomplished, and how many people were impacted by these accomplishments?
- Did you get a lot done with limited funds?
When you look at your numbers and mull over these types of questions, you can begin to compare what people will see upon looking at your numbers, versus what you want them to see. In doing this, make sure you’re thinking about who in particular is seeing your financial statements, whether they are an internal audience (your board or department leaders), or an external audience (your funders or your supporters who read your newsletters). This is likely to determine what kind of story you’re trying to communicate and why. After considering the numbers, your audience, and what you’d like your numbers to say about your nonprofit, you’ll be able to start framing your finances into a "story."
Figure out how to highlight your best numbers. If your audience were to simply look at an unadorned financial statement, the bald numbers tell a story of their own, one that may or may not be consistent with what you'd like them to convey. Different groups will have different types of stories they want to develop, but in a very general sense, what you'd probably like your audience to take away from your financial statement is something to the effect of, "This organization has done a lot of great work this year, and they are deserving of support." Sometimes, if you're lucky, this can be easy to demonstrate.
If you run a theater company and your numbers show that you sold a lot of tickets, generating enough income to easily outweigh your production expenses, then that is obviously going to look good to anyone laying eyes on those numbers. So, if you're fortunate enough to have some good numbers, show them off! Feature them prominently in a newsletter article, give them extra attention in your annual report, and point them out in your grant proposals.
Figure out how to explain your "worst" numbers. It's not a great idea to try to hide your "bad" numbers or to fudge them into better numbers. But while you shouldn't hide them, you can certainly explain them. If you spent more money than you raised this year, your audience is probably going to notice no matter what, so give them an idea of how and why it happened, and how you're working to correct this issue. If you seem to rely too heavily on just one funder for support, you can describe it as a close partnership that demonstrates how much faith the funder has in your organization's work, while also mentioning how you are using that major funder's seal of approval to help you persuade additional funders to provide you with support in the next fiscal year. Honesty is generally the best policy, just as long as you understand how to show these honest numbers in their best possible light.
Ensure that your numbers correspond with your story. This is especially important in regard to the more problematic numbers. Remember how, in a traditional fable, there is always a "moral of the story"? In your case, your programs are the moral of your story. Your numbers should hearken back to the quality of your programs. This is easy when you're dealing with obviously good numbers, like a visibly healthy income stream, but can require a little extra spin if you have a more challenging number.
Will your administrative expenses look unusually high to your audience?
According to your story, the expenses may be high because you pay competitive salaries in order to attract the best possible employees to your organization, which in turn leads to better programs.
Are your fundraising expenses high?
Your story might indicate that this is due to a high-profile capital campaign that aims to raise millions of dollars. Raising those millions of dollars leads to – you guessed it – improved and expanded programs. You probably get the idea by now.
Finally, don't be afraid to learn a little more about accounting procedures, as this can help you communicate more effectively with your supporters, your management, and your funders. For more information on nonprofit accounting, you can search the Foundation Center's Catalog of Nonprofit Literature using the subject/descriptor "nonprofit organizations—accounting". Among our library's resources are many user-friendly books tailored towards beginners, such as Not-for-Profit Accounting Made Easy or Nonprofit Law and Governance for Dummies. Many of these tools can help you get started on the path to a fuller understanding of your organization’s finances and how you can incorporate them more fully into your communications. And in terms of boosting your communications skills in order to help you frame your work into this notion of "telling a story", you can also search under a term like "nonprofit organizations—communications" and try some books such as Strategic Communications for Nonprofit Organizations: Seven Steps to Creating a Successful Plan, or Storytelling for Grantseekers: The Guide to Creative Nonprofit Fundraising. Armed with these tools, you can be well on your way to integrating your organization's finances into your communications in the most positive and effective ways possible.
-- Tracy Kaufman, Library Assistant, Foundation Center-New York
Recent Comments