How to Increase Transparency in Reporting

"Please see the financials attached. "Let me know if you have any questions." This is considered by many accounting pros to be a sufficient reporting deliverable. Usually coming from external bookkeepers or controllers, and I've even seen it come from some titled CFOs. 😬 I mean, I wouldn't expect anything more from a <$600/mo bookkeeping engagement. But even AI does better than that. Accounting teaches that the pinnacle of reporting comes from the financial presentation. But the real value comes from interpreting the financials in ways understandable and important to the receiver. To upgrade your reporting, it doesn't take much to start: 1. Schedule recurring monthly finance reviews. Face-to-face in-person or virtual is fine. Ask the org's important people who should be there, and extend the invites. 2. Send them the financials ahead of the meetings, with some relevant notes and infographics. I like to take screenshots of important things and put them in an email. Some prefer PDFs, PPTs, or a dashboard link or export. Whatever your preference. 3. In the meeting, focus on the relevant things. Know as much as you can, but it's also ok to come with questions when you don't yet have context. Especially when you're getting started, this exercise is as much to understand as it is to be understood. 4. Let curiosity guide reporting evolution. Naturally, there will be questions. From you and the receivers. Let it guide the next analysis. Start establishing expectations. Measure against those. (Oh my gosh, you're starting to get into FP&A). I believe that FP&A makes accounting valuable. And the bridge between the two is reporting. It doesn't have to super robust. In fact, it shouldn't be--at least to start. Start simple and add complexity if necessary.

What if sustainability reporting became as clear and consistent as financial statements? In 2021, the International Sustainability Standards Board (ISSB) set out to do just that. Responding to growing demands for globally recognized standards, the ISSB didn’t reinvent the wheel. Instead, It is built on the work of established frameworks like SASB (Sustainability Accounting Standards Board) and TCFD (Task Force on Climate-related Financial Disclosures). This effort culminated in the release of IFRS S1 and IFRS S2 in June 2023. These standards address general sustainability risks and climate-specific risks, making it easier for investors to assess a company's resilience in a changing world. Here’s why this matters: -Investors are paying attention. A recent PwC survey revealed that 83% of investors consider ESG risks essential in their decision-making. But inconsistent reporting has made it challenging to compare companies. -Sustainability is industry-specific. The ISSB integrates SASB's 77 industry-specific standards, bridging the gap between general guidelines and sector-focused realities. As someone deeply involved in sustainability and accounting, I see this as a significant step forward. For years, companies have struggled to align sustainability and financial reporting. The ISSB standards simplify this process, ensuring that sustainability data is as reliable and comparable as financial statements. Adopting these standards now, even on a voluntary basis, positions companies ahead of the curve. It’s an opportunity to show stakeholders investors, regulators, and customers—that you’re serious about transparency and long-term value. In my experience, transparency is the foundation of trust. When sustainability data is as clear as financial data, everyone benefits companies can focus on meaningful action, and investors gain the clarity they need to make informed decisions. What’s your take? Have you seen these standards in action, or are you exploring ways to integrate them into your reporting? Let’s discuss this in the comments.

Executive directors hiding funding issues? It happens more than you think. I've seen a nonprofit leader who rarely cashed paychecks to help with finances. And another who took out personal loans to donate to the organization. While these actions stem from good intentions, they often create more problems than they solve. Here's why: 1. Hiding financial struggles prevents boards from fully understanding the organization's health. This limits their ability to provide strategic guidance and support. 2. Leaders forgoing paychecks can lead to burnout and resentment. And of course, there are some labor law issues, putting the nonprofit at risk. 3. Personal loans to the organization blur professional boundaries and can create conflicts of interest. By concealing financial realities, leaders unintentionally make it harder for boards to provide effective oversight and support. This lack of transparency can erode stakeholder trust and hinder the organization's ability to address challenges proactively. This is why I advocate for a culture of openness in nonprofit financial management: - Regular, detailed financial reports to the board - Open discussions about fundraising challenges and successes - Clear policies on executive compensation and benefits Implementing these practices offers several benefits: 1. Improved decision-making: With accurate financial information, boards can make more informed strategic choices. 2. Enhanced donor confidence: Transparency builds trust, potentially leading to increased donations and long-term supporter relationships. 3. Better resource allocation: Understanding the true financial picture allows for more effective budgeting and program planning. 4. Stronger partnerships: Open communication about finances can lead to more productive collaborations with other organizations and funders. By fostering a culture of financial transparency, we're creating an environment of trust and collaboration. This allows nonprofits to focus on their core missions without the burden of hidden financial stress. Remember, transparency isn't just about sharing numbers – it's about creating a culture of honesty, accountability, and shared responsibility for the organization's financial health. What steps is your nonprofit taking to increase financial transparency?