As part of your nonprofit’s governance best-of-practice, you likely find yourself faced with the recurring task of compiling reports to deliver to your board of directors and other key stakeholders. Depending on the specific needs of your organization, this reporting may fall into one of the scenarios listed below, based on the frequency of the reporting required and the type of report needed.
These are the standard reporting periods used by organizations to track operational metrics.
- Monthly: Monthly reporting on operating expenses and overhead costs exposes spending trends that could be harming the health of your nonprofit. These reports help you analyze the cost of running your organization monthly and uncover ways to reduce monthly costs.
- Quarterly: Quarterly reports are used to compare an organization’s business health from year-to-year. Your nonprofit’s budget results from the first quarter of the current year would be compared to the first quarter of the previous year to anticipate any budget challenges in the current year second quarter’s budget.
- Annually: A yearly budget report illustrates the overall health of your organization. Use a yearly budget report to track your nonprofit’s revenue and expenditures over the course of a year to provide budget guidance for the coming year.
- Combined: Using monthly, quarterly, and yearly reporting data to create a comparative combined analysis helps expose the details of your organization’s performance fluctuation over time and is invaluable for monitoring your nonprofit’s overall financial health.
While by no means an exhaustive list of all the possible report types, here are some standard report types that can provide insight into your nonprofit’s operational health.
- Financial Statements: Financial Statement reports provide a window into the cash flow of your nonprofit. For example, a Balance Sheet report compares the difference between your organization’s cash on hand as compared to financial commitments. Also, a Statement of Cash Flow report that combines the information from an Income Statement report and Balance Sheet report shows how cash is going in and out of your organization.
- Budget: A Budget report is used to compare an estimated budget with the actual budget used during a set period. For example, a Summary Budget Comparison report compares budgeted revenues and expenses with actual revenues and expenses for a specified time.
- Accounts Payable/Receivable: An Accounts Receivable (AR) Aging report tracks your organization’s AR balances by the time an invoice has been open and can be used to evaluate a donor base’s financial stability. An Accounts Payable (AP) Aging report tracks your organization’s AP balances and lists the amounts your organization owes. Comparing the two can help your nonprofit better understand the organization’s cash flow.
Reporting is a powerful business tool that can be used to monitor the overall health of your organization. Consider presenting your financials visually, where possible, as it will help your audience:
- Focus on the information that’s most important
- Identify patterns and trends in your organization’s finances
- Illustrate cause and effect
- Pinpoint any deltas
- De-emphasize unnecessary/superfluous data
- Draw faster conclusions
Finally, using consistent reporting will help you justify your operational activities to your nonprofit’s board of directors by confirming that all is well within your organization’s operations, and by ensuring any detrimental issues are quickly identified and addressed to their satisfaction.