‘Good governance’ refers to how well an organisation is run, particularly in the areas of strategy, accountability, compliance and performance. Managing and monitoring these is one of the key tasks of a board, but it’s important to recognise that many board members are not always familiar with accounting reports and terminology, so it’s important to identify which reports provide sufficient information to make decisions efficiently.
Strategy
Long-term strategic direction decision-making requires a board to assess forecasting reports. The most basic of these is a Budget Profit and Loss Spreadsheet report, which shows expected income and expenses – and profit or loss – monthly for the next twelve months. Ideally, this report would be summarised so that it fits on one page; while it’s unnecessary for board members to know the exact cost of postage stamps, it’s essential they gain an understanding of total administration expenses.
The second important strategic report is the Cashflow Forecast. Boards are responsible for ensuring the future financial viability of the organisation and that it’s not breaking the law by trading while insolvent. The only way to do this is to regularly review forecasts of future cashflow. In the past this has been difficult because the calculations involved are beyond most spreadsheet users, but modern budgeting software such as Calxa can greatly simplify this process.
Accountability
It’s important for board members to have reports that summarise and compare actual expenses against planned spending, such as the Cost Centre Budget Summary report offered in Calxa Premier, one of the most commonly used reporting and budgeting tools in the Australian not-for-profit (NFP) sector. This report shows just one line per program, outlining income, expenses and profit for the budgets and actuals for month and year-to-date – providing a quick overview of which programs are on track and which are in trouble. Calxa’s Budget Summary (Unspent) report provides further detail, showing actual performance compared to budget for the month, year-to-date and against the annual budget.
To view spending, you could construct a traditional Statement of Cashflows report, generate it from accounting software such as MYOB, or use Calxa’s Where Did Our Money Go? report.
Compliance
NFP compliance needs to be monitored in two ways: compliance with laws and regulations, and compliance with terms of grants and other funding. The ‘trading while insolvent’ requirements, mentioned earlier, are best dealt with by a Cashflow Forecast. Grants can be managed with a report such as Calxa’s Budget Summary (Unspent), which shows progress against the annual budget, or a Reforecast Unspent Budget Spreadsheet report, which recalculates budgets for the remainder of the year to show what is left to spend, adjusted for what has already been spent.
Performance
Managers are frequently held to account by comparing their actual results to either the approved budget – signed off at the beginning of the year – or the current forecast, which provides an even more recent update. At a high level, the Cost Centre Budget Summary report will provide a good overview. For more detail, use a Budget Summary or the Budget Profit and Loss Spreadsheet reports.
Multi-purpose reports
It’s important to note that some reports serve more than one purpose, which is helpful when trying to ensure your board is not overwhelmed by figures. The Cashflow Forecast, for example, is useful for both strategy and compliance; the Budget Summary for accountability, compliance
and performance.
All abovementioned reports are available in Calxa Premier, however, it should be noted that these reports could also be reproduced in a spreadsheet by someone with the right skills and time.