Posts made in April 2018

Developing Effective Dashboards and Key Performance Indicators June Nonprofit Forum

We hope you’ll join us for what has become one of the hottest nonprofit accounting topics: Dashboards and KPIs.

It’s more than measuring – though that is necessary.  It’s more than powerful displays – though they are so cool to work with.  It’s about choosing the right things to measure and monitor with your mission in mind.

Join us online for the Nonprofit Forum June 27, 2018

11:30 to 12:30-Financial Management Topic
Developing Effective Dashboards and Key Performance Indicators

Simply click on the link to register for Developing Effective Dashboards and Key Performance Indicators.

Do you have a dashboard and know what your key performance indicators (KPI’s) are for your organization? Please bring your questions so we can have a candid conversation regarding dashboards and KPI’s.

We’re happy to share what we’ve seen in the field, but it will be a more valuable use of your time to talk about what matters for your organization.

Nonprofits are complex organizations that are built around mission and outcomes, which must be supported by the right revenue and expense models. We will cover the critical aspects of Effective Dashboards and Key Performance Indicators including:

  • How dashboards allow decision-makers to see where and whether the organization is on the planned financial path
  • Using dashboard with funders and stakeholders to illustration real-time progress towards desired goals.
  • How to develop the associated metrics and constantly review to ensure you are measuring success for the organization.

A properly designed dashboard allows a nonprofit to monitor its effectiveness as evidenced by the financial health along with the impact of the programs and services provided. Board and staff should develop strategy and goals to create dashboards with focused conversation and collaboration.

When you select the dashboard elements, you should understand the data you will track and how that data will influence decision making. Questions to ask include: Are the metrics for the organization or function? Is the tool for the board, staff, or funders?

Please join us – the Nonprofit Forum is free to nonprofit organizations, but registration is required. Simply click on the link to register for Developing Effective Dashboards and Key Performance Indicators.

For a listing of future Nonprofit Forum dates and topics, please visit our Events page.

Building a Superior Budget - May Nonprofit Forum

Building a Superior Budget – May Nonprofit Forum

Nonprofit Forum Agenda for May 30, 2018

11:30 to 12:30-Financial Management Topic
Building a Superior Budget
Please join us online, Wednesday, May 30; simply register using the link below.

Click here to register for Building a Superior Budget – May Nonprofit Forum

This session is free to nonprofit organizations.

The May Nonprofit Forum continues with Building a Superior Budget.

Those attending the May Nonprofit Forum – Building a Superior Budget will learn:

  • How to transform a strong budget into a superior budget
  • What most nonprofit leaders focus on and what they should focus on
  • How to use a rolling forecast to better anticipate results
  • Where cash flow projections could impact adjustments
  • And more

Click here to register for Building a Superior Budget – May Nonprofit Forum

A strong budget is an essential element for any nonprofit organization to achieve financial leadership. Superior budgets, though, have written plans about the core activities to include strategic, organizational, and program goals and how they will be financed.

Most financial leaders focus too much time on budget variance analysis and not enough time to anticipating or planning for the future. By anticipating or planning, organizations can focus on what’s upcoming regardless of its budget cycle or fiscal year end. A budget can be complemented with rolling forecasts to better anticipate upcoming financial results.

Budgets also need to include cash flow projections, which maybe outside of the finance department’s capacity or capabilities. Financial leaders must have a direct role in developing useful cash flow projections and assumptions with frequent, detailed analysis.

Any cash flow shortage needs to be further evaluated to determine if it is just a timing difference or an actual cash deficit. Shortfalls created by deficits need to be solved by budget adjustments or strategic choices to absorb a shortfall. An organization can determine timing or actual deficits by reviewing the budget to see if it had planned for or not.

Financial sustainability can only be achieved with a well-prepared and continuously monitored budget. Conversely, a poorly developed budget can diminish mission focused activities opportunities and threaten long-term success.

Click here to register for Building a Superior Budget – May Nonprofit Forum

Those attending the forum will receive handouts.

12:30 to 12:50-MIP User Group-Budget Refresher

12:50 to 1:00-FTM Updates and Closing

Click here to see a listing of future Nonprofit Forum topics.

Boards can provide effective financial governance for your nonprofit

Boards can provide effective financial governance for your nonprofit

By Jim Simpson, CPA and director, Financial Technologies & Management

In the nonprofit community, board members don’t always provide effective financial governance. One key difference in the nonprofit sector is that the board focuses on the nonprofit’s mission and not the finances or profits. But all are necessary.

Nonprofits would have more public trust if all board members performed their financial governance at a high level and challenged one another and executive management for excellent financial performance.

There may, however, be some roadblocks. As a board member, are you unsure or scared of your financial governance role with the nonprofits you serve?

If the desire is to have a more effective board, there are some essential financial governance responsibilities that a board should be performing for a nonprofit.

Here are eight effective financial governance responsibilities to look for in your nonprofit.

  1. Financial tracking by funds and program. It is not good enough just to know if your organization has a surplus or a deficit for the organization. You should know if your individual funds and programs are generating a surplus or deficit. It is impossible to be a financial steward if you don’t know which funds or programs are overspent or underspent.
  2. Financial reports need to be produced monthly. It is imperative that board members receive financial reports at least monthly. A board member can only perform his or her financial governance role if he or she can help the organization to anticipate and plan for changes based on financial results. It is important that these financial reports are timely and accurate to avoid making the wrong financial decisions. The financial reports should be goal oriented to allow the financial governance to focus on its accomplishments. Best practices financial reporting would include both budget and historical variance financial analysis. A goal oriented report would focus on the budget priorities and key financial areas of the nonprofit.
  3. Financial health is priority. Poor financial health usually results when no one knows the financial condition and when one person controls all financial information. Significant comments from the annual audit and staff turnover are also indicators of poor financial health. It is important that the board pays attention when these conditions exist and work towards increasing financial expertise and capacity. Financially healthy organizations hold themselves accountable, understand roles, and maintain compliance with adequate and qualified staff. Effective board and management practices are essential for segregation of duties and internal controls. These board financial practices should promote communication, expectations, and operating efficiencies so the organization can be monitored efficiently and effectively.
  4. Proper accounting software. Many nonprofits use manual or commercial applications to perform nonprofit accounting. It is important that you provide the finance staff with the right tools and accounting software to do the job properly.  It is important that board members ask questions regarding how the organization tracks financial information. One financial question to ask might be: Does the organization track financial information by funding source, by program and by accounts?  An annual review of accounting software and tools can uncover what additional software modules are needed including whether you have outgrown your current software.  It is important that organizations review software that is designed for nonprofit organizations. Nonprofit accounting software typically allows integration of third party systems like fundraising and payroll to increase efficiencies of various systems.
  5. Financial stewardship. All board members need to act as financial stewards not just the treasurer for the nonprofit’s that they govern. Unfortunately, board members don’t take this role seriously enough and thus organization’s fail financially which significantly reduces public trust.  Board members must understand financial stewardship and make it a priority for the organization that they govern. Board financial practices should include financial policies and procedures that promote stewardship and accountability.
  6. Budget management. Board members need to work to enable management to know when to modify programs and operations. It is important the budgets be realistic and revenue based to anticipate any shortfalls. Budget management should include budget projections and cash flow management to insure stable nonprofit operations and programming.
  7. Financial reserves. Board member financial stewardship roles should include establishing financial reserves for the organization. Financial supporters would rather support well established and financial stable organizations. It is important board and management are committed to generating an operating surplus and positive cash balances. It takes a lot of financial discipline to establish financial reserves.  A nonprofit is typically financially stable once it can generate financial reserves of several months of operating reserves. The financial reserves are essential to shield the organization from reductions or delays in funding
  8. Financial plans. Board members need to have financial plans for the organization. Just as an individual has a financial plan that changes as the individuals needs changes, the nonprofit needs financial plans that are reviewed and modified as needed. Financial goals and strategies should change and anticipate the future.

As a board member, I challenge you to review these financial governance areas of your organization to see how you are performing your financial governance role. It is important that you help the organization perform its financial role and not just rely on the treasurer or executive director to perform this role. It is important that you don’t just assume financial governance is occurring, but verify that it is actually taking place.

Board members need to be equipped board members with the tools and abilities to perform the financial governance roles. Board members need to verify that management and staff has the proper capacity and expertise to perform the finance function for the organization. If the organization does not have the proper internal resources, then they may need to look for outside expertise.