How to Present Financial Statements to the Board
When associations are presenting financial reports to their boards, they should aim to give their board members a vision of where the association is and where it needs to go. Oversharing can distract from that.
Are you sharing too much?
Associations can be guilty of oversharing when they’re delivering financial reports to their boards, according to Paul Preziotti, principal at Johnson Lambert LLP.
For instance, Preziotti said that if associations send their boards a set of financial statements with 20 lines in the balance sheet, as opposed to something that’s more concise, it’s easy for board members to lead everyone down rabbit holes.
But, according to Preziotti, if board members are given something tailored, it not only allows association staffers who are presenting the information to individually go through their messaging in each area, but it also allows board members to really digest the information they are receiving.
After all, the end goal in reporting on financials is getting your board to understand where the association is and where it needs to go. Preziotti offered a few tips for doing just that, while avoiding the common pitfall of oversharing:
Know your board. It’s crucial to conduct a good board orientation and to really get to know the members. “If you know what each board member’s skill level is, where they’re coming from, shaping these reports to their needs will be a lot easier,” Preziotti said.
Keep it concise. The financial information that you give to your board members and that you give to your auditors probably shouldn’t be the same. Preziotti recommended that associations think about giving their boards a financial summary that can be read in five minutes or fits on one page, keeping in mind that the key points of where the association is and where it needs to go should be clear.
Practice the messaging. “As you’re preparing these reports, you should be thinking about the message you’re trying to communicate…,” Preziotti said. How are you going to get your message across?”
Preziotti also noted that there is an array of practical ways that associations can effectively present their financial statements to their boards. For instance, they can offer an association’s balance sheet in comparison to its reserves or prepare their statements based on the organization’s pain points.
What have you found to be effective in presenting your financials to your board? Please leave your comments below.
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