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Preparing a useful financial statement package is essential to your board of directors’ (“Board”) or finance committee’s ability to make informed business decisions. Although there are nuances specific to different organizations that may require additional metrics, there are general measures of performance that can be included in financial statement packages to help leaders make the most considerate decisions for their organization.

Although preparing basic financial statements for your Board or finance committee is helpful, the inclusion of different measures of performance can provide further visibility and context to the financial statements and the success of operations. In addition to presenting the financial statements for the period ended, consider adding the following items as part of your basic financial statement package for your next Board or committee meeting:

Comparison of Actual Amounts to Budgeted Amounts: Comparing the actual financial statement numbers to amounts expected or anticipated, and calculating the variance between them, can assist in assessing the results of operations as well as planning for the future. Consider if there is an advantage to showing the variance in terms of dollars, or percentages, or both!

Comparison of Actual Amounts to Prior Year Amounts: Comparing the actual financial statement numbers to the prior year, and calculating the variance between them, can show if your organization is performing in a similar manner to the past. If there are differences; are you able to explain why? Do they make sense? For income statement numbers, consider comparing the year-to-date amount to the prior year-to-date amount if preparing a mid-year report. This will help to predict if you’re on track to produce a similar net income or loss result.

Statement of Cash Flows: Understanding your organization’s cash inflows and outflows can help identify areas in which your organization can spend less and create excess cash. A cash flow statement explains where your organization is spending and receiving its money. By knowing this information, your organization can make decisions on how to finance its growth. For example, based on the cash activity, you can decide if your organization should tighten its collection policy on receivables and collect from customers more efficiently to generate more cash, or if your organization should obtain a loan.

Financial Statement Metrics: Calculating general financial statement metrics and comparing results to those of prior year or prior period can help to assess your organization’s financial health in simple numerical terms. Although there are numerous helpful metrics that can be calculated, below are three useful metrics:

  • Current Ratio: By dividing your organization’s current assets by its current liabilities, you can determine if your organization is able to cover its short-term liabilities using its current assets (i.e. cash, receivables, inventory, etc.)
  • Return on Assets: By dividing your net income figure by your average total assets, you can measure how much income is being generated on average by your assets.
  • Profit Margin: By dividing your net income by your net revenue amount, you can measure the percentage of each dollar of revenue that your organization keeps as earnings.

For assistance in preparing a financial statement package or for additional information, please feel free to contact Kristi Yanover, Audit Partner, at (858) 558-9200, or any member of our Accounting & Assurance Team, as we would be happy to assist you.

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