Creating a Change by Eliminating Fluff
Tuesday February 14, 2023
Any accounting business or tax advice in this here podcast is not intended as a thorough in depth analysis of your specific issues. It's not a substitute for a formula opinion. It is not good enough to avoid tax related penalties.
You know, the last two weeks I talked about what do you want to know? So you want to know how much cash you have. What's coming in and out? What do you need to know? You need to know the context like how did this happen? How does this rank in terms of what we thought we would do or how we've done in the past? How we compare to other organizations.
So I also want to tell you what is just fluff. So oftentimes, organization leaders want to know information. But you want to also think, is this information going to inform something? Is this going to help us make a decision? If it doesn't help you make a decision, I'm going to say it might just be fluff. So I think of this because of Amy Contractor, she runs Workplace Equity Partners. She does data collection and helping inform the way you write questions. In talking with her, she mentioned, you want to ask questions that are going to lead to a change.
So you want to ask things that if you had the power to change the outcome would you do an action? So for example, if your organization is like, hey, we want to know the demographics of our donors, so you want to know their age or their race? Will you change your decision making based off of the information you have? Yes, sure. Ask those questions. Say that's something that you want to know, if you're not going to change the way you do things. Maybe that's fluff. Maybe that's not something you need to include in your financial reports in your dashboard.
Another thing you want to think about is, if you're asking your treasurer, whoever's putting through their financial statements, hey, can you give us an idea about our reserves? Like how much do we have? Well, if you've never talked about a reserves policy, I would say this is fluff because there is no number. And so this is another place where context is going to be important. You need to establish a baseline so that you know, hey, this matters, this doesn't matter.
Another thing that I want you to consider about could this be fluff or not at your organization, is if you are doing your reports, and you are not factoring in the upcoming items. So maybe somebody puts together a forecast, but no one ever looks at it. Last episode, I said, you know, you want to know about what's coming up. But if no one is ever talking about it, as much as it pains me, maybe that's just fluff for your organization. I'm not saying it's fluff as it’s unnecessary. I'm saying maybe the timing of presenting this information is not where it's most useful. Maybe your board and your leaders are more focused on, I don't even understand the first two pages like what do we have? Who do we owe and how is money coming in and out? I can't even wrap my head around. How do we plan for the future?
So that's the other piece of considering what is fluff? Are you building reports that are too advanced for the audience that you are serving? So maybe it's fun to put together, you’re like, it's super cool, but it's not really helping them. And so consider that I love a good dashboard. I think everyone should use it because it can give you information in a different way. But if people aren't understanding it, maybe you should scale back and start with the basics of, hey, we have our balance sheet. It's going to tell us what we own, who you owe, and then what's left. This is our statement of activity. It's going to tell us how many came in and how many came out.
Focus there before you start building or think about if you're going to add a dashboard, helping it be reframing of those two pieces of information. So your statement of financial position, AKA your balance sheet and your statement of activity aka your income statement, your p&l. That way, you're reiterating information instead of compounding and piling new information that people can't yet process.
I hope this was helpful for you. I hope that you now feel a little bit more confident, talking about money and thinking about what could you remove from your financial statements or your financial reports because they're just fluff. All right. Until next time, I'm Chyla Graham. This has been another episode of The Nonprofit Ace Podcast.
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