At the heart of every successful nonprofit is a strong and engaged board of directors. However, effective communication between the board and leadership can often be a challenge. This is particularly true when it comes to conveying complex financial information. This guide will equip you, the nonprofit controller or CFO, with the knowledge and strategies to communicate effectively with your nonprofit board. We’ll address common pitfalls, explore best practices, and provide actionable tips to ensure clear and informative communication.
Understanding Your Board
The people who serve on nonprofit boards of directors usually have a lot of different skills and come from different backgrounds. This diversity is a strength, but it also presents a challenge when communicating financial information. As a nonprofit controller or CFO, you play a crucial role in presenting complex financial information in a way that all board members can easily understand, even those without a background in nonprofit finance.
Why Effective Communication With Your Nonprofit Board Matters
Clear and strategic communication is even more important when decisions involve complicated financial and operational details. Being able to make decisions based on accurate information is another important part of effective communication.
Key Benefits Of Effective Board Communication
- Informed Decision-Making: Clear communication guarantees that board members fully understand the issues at hand, leading to more informed and strategic decision-making.
- Increased Engagement: When board members feel well-informed, they are more likely to engage actively in discussions and contribute valuable insights.
- Aligned Vision: Effective communication helps align the board’s vision with your organization’s goals, ensuring that everyone is working towards the same objectives.
4 Effective Communication Strategies
Now, let’s look at some practical strategies for presenting financial information to your nonprofit board:
1. Tailor Your Communication To Your Audience
Understanding your audience is the first step in effective communication. Nonprofit boards usually consist of individuals with varying levels of expertise in different areas. Therefore, it’s important to tailor your message to suit the background and knowledge level of your board members.
Tips for tailoring your communication
- Know Your Audience: Before each meeting, consider the background of the board members. Are they financial experts, legal professionals, or community leaders? Adjust your message accordingly.
- Avoid Jargon: Use clear, straightforward language. Avoid industry-specific jargon, especially when discussing financial matters.
- Use Analogies: When explaining complex concepts, use analogies that your board members can relate to.
2. Use Visuals to Simplify Complex Information
One of the most effective ways to communicate complex information, especially financial data, is through visuals. A board member can quickly understand important points without getting lost in numbers with the help of charts, graphs, and images.
Best practices for using visuals
- Simplicity is Key: Keep visuals clear and simple. Use pie charts, bar graphs, and other visuals that are easy to understand at a glance.
- Relevance: Make sure that your visuals are directly related to the information you’re presenting. Irrelevant visuals can confuse your audience.
- Consistency: Use consistent colors, fonts, and styles throughout your presentation to create a cohesive and professional look.
3. Maintain Transparency and Honesty
Transparency is vital in nonprofit board communication. Board members need to trust that they are getting the full picture, including any challenges or risks your organization may be facing.
How to maintain transparency
- Share the Good and the Bad: Don’t shy away from discussing challenges or areas where your organization may be falling short. Board members need this information to make informed decisions.
- Provide Context: When presenting data, provide context to help board members understand the implications. For example, if you’re reporting a budget shortfall, explain the reasons behind it and any steps being taken to address the issue.
- Regular Updates: Keep your board informed through regular updates, even outside of formal meetings. This helps build trust and keeps them engaged.
4. Follow Up After Meetings
Communication shouldn’t end when the meeting does. Following up with your board members after meetings helps reinforce key points and ensures that everyone is on the same page.
Effective follow-up strategies
- Meeting Summaries: Send out a summary of the meeting, highlighting the key decisions made and any action items.
- Additional Resources: Provide any additional resources or information that was requested during the meeting.
- Check-Ins: Consider checking in with board members individually to address any concerns or questions they may have.
Presenting Financial Information To A Non-Financial Audience
Financial information is often one of the most challenging aspects of board communication, particularly when board members do not have a background in finance. However, with the right approach, you can make this information accessible and understandable.
Using Visuals To Present Financial Data
As mentioned earlier, visuals are a powerful tool for simplifying complex information. When it comes to financial data, they can be particularly effective in helping non-financial board members understand key metrics.
Examples of effective financial visuals
- Pie Charts: Use pie charts to show the breakdown of expenses or revenue sources. This helps board members see where the money is coming from and where it’s going.
- Bar Graphs: Bar graphs are great for showing trends over time, such as changes in revenue or expenses.
- Infographics: Infographics can be used to explain more complex financial concepts, such as cash flow or the relationship between different financial statements.
Avoiding Complex Accounting Terms
When presenting financial information, it’s important to avoid complex accounting terms that may confuse your board members. Instead, use plain language and provide explanations for any necessary technical terms.
Tips for simplifying financial presentations
- Define Key Terms: If you must use technical terms, be sure to define them in simple language.
- Focus on the Big Picture: As a nonprofit controller or CFO, focus on the big picture instead of getting caught up in the details. What are the key takeaways that board members need to know?
- Use Examples: Provide real-world examples to illustrate your points. For example, if you’re discussing cash flow, you might explain it in terms of how it affects your organization’s ability to pay its bills.
Engaging Your Board With Financial Information
Engaging your board with financial information can be challenging, but it’s crucial for ensuring that they are fully informed and can make sound decisions.
Strategies for Engaging Your Board
- Interactive Presentations: Consider using interactive presentations where board members can ask questions and explore the data in real time.
- Storytelling: Use storytelling techniques to explain financial information. For example, you might tell the story of a specific program’s financial performance over the past year.
- Relate Finances to Mission: Always relate financial information back to your organization’s mission. This helps board members see the impact of financial decisions on the overall mission.
Remember, the goal is to use visuals to improve understanding, not to overwhelm your audience with data.
Common Board Communication Challenges
Even with the best strategies, you may encounter challenges in board communication. Here’s how to address some common issues:
- Information Overload: Be selective about what you present.Focus on key metrics and provide additional detail in addition or upon request.
- Knowledge Gaps: Create a “Financial Literacy Corner” in your reports, explaining one new concept each month to build financial understanding over time.
- Sensitive Information: Develop clear protocols for handling confidential financial matters, ensuring compliance with legal and ethical standards.
- Balancing Detail and Strategy: Always connect financial data to strategic goals. Help the board see the forest, not just the trees.
Developing a Board Communication Plan
To maintain consistent, effective communication, develop a comprehensive board communication plan:
- Assess Current Practices: Survey board members to understand their communication preferences and pain points.
- Set Clear Objectives: Define what successful board communication looks like for your organization.
- Establish Channels and Frequency: Determine how and when you’ll communicate different types of financial information.
- Create Templates: Develop standardized formats for recurring reports to maintain consistency and save time.
The Role of Outsourced Accounting and Fractional CFO Services
For many nonprofits, partnering with external financial experts can significantly enhance board communication. Fractional CFO services can provide high-level strategic insights, while outsourced controller services ensure accurate and timely financial reporting.
These professional services bring industry best practices to your organization, often improving the quality and clarity of financial communication. They can also provide an objective perspective, which can be valuable when presenting complex or challenging financial information to the board.
By implementing the strategies outlined in this guide and using the expertise of Array Accounting & Consulting, you can bring your board communication to new heights and drive your nonprofit’s success. Our team of experts can provide the support and expertise you need to optimize your financial operations and strengthen your communication with your board.
We encourage you to take the next step and contact us to discuss your organization’s specific needs.
FAQ
Provide monthly or quarterly updates, with more detailed reports at least annually. Adjust frequency based on your organization’s needs and board preferences.
As a nonprofit controller or CFO it is important to highlight significant variances, explain the reasons behind them, and propose action plans for addressing any concerns.
Present your concerns professionally with supporting data, offer alternative solutions, and respect the board’s final decision while documenting your advice.
Our Nonprofit Accounting Services can provide financial clarity and support, while our Expert Non-Profit CPA Tips: 10-Point Audit Checklist offers valuable guidance.
Provide a comprehensive onboarding process, including orientation sessions, access to key documents, and mentorship from experienced board members.
Diplomacy is key! Explain the financial constraints clearly, offer alternatives, and show how you’re working towards their goal, even if it’s not immediate.
