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Refining Your Financial Strategy

The Board cannot afford to compromise on the quality and timeliness of financial information.  Financial reports are needed to support decision making by board members, to inform future planning and to be satisfied as to the organisation’s solvency. 

Financial reports must meet a number of criteria:

  • The report must provide high quality information;
  • The material should be framed in such a way as to ensure that board members understand the content;
  • If a small organisation without experienced financial staff, the information on which the report is based should be overseen by a board member with financial skills (although this does not absolve ALL board members from responsibility for understanding financial reports); and
  • There should be a clear deadline for providing the reports to board members before meetings.


Key Financial Reports to be provided to the board:

1. Income and Expenditure Statement (profit and loss statement)  

  • Produced monthly, with year-to-date statements.  It should include comparison against the budget and with forecasts for the remainder of current year.
  • If activity is reasonably similar from one year to the next, the report should also include a comparison with the previous year's figures. 
  • Allows board to identify trends over time and flag any ‘red’ issues 
  • Can include useful profitability ratios, such as Gross Profit Margin (Sales minus Cost of Good Sold divided by Sales [expressed as %]  and Return on Assets (Net income divided by total assets)

2. Balance Sheet  

  • Provides a snapshot of the financial position at a single point in time
  • Is produced monthly, with year-to-date figures 
  • Measures short term liquidity – Can you pay your debts??? 
  • Useful ratios, such as Current Ratio (current assets divided by current liabilities) and Quick Ratio ([current assets minus inventories] divided by current liabilities)

 3. Cash Flow Statement


  • Is produced monthly, with year-to-date statements. It should include a comparison with the budget, also with forecasting for the next six months (longer if possible) 
  • Provides a record of cash / spend changes in balance sheet and income statement
  • Provides information on  liquidity and solvency 
  • May be a requirement for funding applications 
  • Shows cash flow from operating activites, investing activities and financing activities

 4. Other relevant information for decision-making



Top Five Financial issues for a Board

1. Solvency:  Are we going to survive? Can we pay debts when due? 

What to do -
  • Understand and monitor cash positions to support viability 
  • Know how to read & understand your financial statements 
  • Know the implications 
  • Use tools to monitor your financial stability (eg WIN Forecast - 3 way modeling accounting program that reports P/L, Balance sheet and Cash Flow) 
  • Develop a ‘worst case’ scenario 
  • Nominate a board member with financial skills who can interpret reports and mentor board members who may have less financial experience.
2. Internal Control System: Internal checks that provide accurate information and prevent unauthorized financial transactions.

What to do –  
  • Understand internal policies  and procedures (look at transaction flow, level of segregation by members – even important within a small organisation)
  • Monitor payment / disbursement policies (they are worth nothing unless monitored)
  • Understand the strengths and weaknesses within the framework 
  • Management override 
  • Understand the external auditor’s role –  
  • Know what information is standard and what you need to be asking for 
  • Have an audit planning meeting one month before the audit to set the scope of audit
  • The auditor should present the final audit report to the board in person
  • Request that the auditor or an external accountant attend board meetings once a year (independent of the book keeper).

3. Accounting and Finance Policies:  Understanding the policies in place, making them relevant to the organisation

What to do –

  • Review of policies, for example investment policies (how should surplus cash be dealt with - this should not be just a year-end consideration)
  • Review grants policies -   
  • Grants should still show through cash projections
  • Should the grant go into a term deposit? (Get sound financial advice on no-risk options)
  • Check on how grants are to be accounted for – it can have a significant impact on reported earnings and balance sheet position.

4. Activity-Based Accounting: Assigning revenue and costs to individual activities and tasks

What to do –

  • Understand the cost drivers so event Profit & Loss statements are meaningful – which in turn impacts on management decisions 
  • Link financial reporting to the business plan – relating to revenue and cost drivers.

5. Board Reporting Framework: Providing appropriate and sufficient financial information to the Board, with sufficient time before meetings, to enable informed decision making.  If necessary, identify one board member with financial skills who can oversee the information on which the reports are based and who can interpret the information for others.


Prepared from material presented by Diana Borin, Director Accounting Advisory Services and Hamish Doley, Partner, Middle Market Advisory, KPMG, on 7 October 2009.


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