Monthly Financial Reports... Part 2
Everyone should have a budget that they measure monthly results against. The best practice is to put this in place (with board approval) prior to the beginning of the fiscal year. Budgeting is essential, the challenge is what level of detail is needed? If we aren’t careful the categories will be so small that they are not meaningful. What level of detail do you need to run your nonprofit? That’s where to start. Then review that with your board, and see if that level of detail is sufficient for their oversight. Budget reports should compare the budget for last month with the actuals for that month. As the year progresses, it usually makes sense to add a comparison of year to date (for last full month) actuals with the year to date budget. Cash flow projections may or may not be needed. If you have concerns about meeting payroll and other costs, consider developing this projection. Our next post will be about providing your Board with a ‘Dashboard’ to make it easy for them to understand the key operating issues from the last month’s numbers.