When you start out, your business’ or nonprofit’s financial reporting system might only amount to simple record keeping or bookkeeping. Often you’ll start with a cash-basis system and a checkbook, or recording transactions in a general ledger.
At first, this seems like enough. But it’s important to note that holistic financial management should be more than just keeping records. Today, we’re going to look at some of the ways you can assess your reporting system and make changes to adapt to your business’ or nonprofit’s individual needs.
What Makes a Financial Reporting System “Good”?
There are multiple factors that you want to consider as you review your existing recording system or look to implement a new one. While it’s impossible to say that one system is always better than another, since every organization has varying needs, consider how well your financial reporting system utilizes these factors:
- Recording entails putting in systems for comprehensiveness and accuracy
- Reporting entails knowing what is going on and asking questions to understand the records.
- Analyzing entails evaluating reports for what they reveal about the organization and making corrections where necessary.
- Incorporating entails using the analysis to budget, plan, and think long term.
A good reporting system leads to better management of finances, and a more successful organization.
If you see that your financial reporting system doesn’t do all of these things for your organization or you start to think your organization’s financial reporting system isn’t cutting it, you’re probably right.
Some Basics: Resources, Methods, & Communication
A financial reporting system you have in place might lack proper resources, which can mean either the people or the software taking care of your finances are not quite making the cut. You need enough people with the right skills and software that’s equipped to monitor the many accounts, budgets, and other analytics that your organization needs to be tracking.
Another area to consider is the methods by which you conduct financial reporting. For example, if you have inventory and you are selling some kind of product rather than just your services, or your organization has the possibility of being audited, your business should most likely be using accrual basis accounting.
Small businesses with no inventory can get along with simpler cash-based accounting, but often growth for any kind of business or nonprofit will also come with a need for a more complex system and more support for that system. For some, this might mean maintaining cash-based recording and getting assistance for financial statements. This is just one way in which having proper procedures and methods in place is necessary for tracking all the moving parts of your organization’s finances.
Communication is another piece to a successful financial reporting system. If you have the right people, the right software, the right methods and procedures in place to collect data, all of this is useless if you aren’t able to turn it into usable information for the entire organization.
Are You Ready to Take a Closer Look at Your Financial Reporting System?
Whether it’s organizational growth or new reporting needs, it might be time to update or outsource the important work of financial reporting. At Temple Management, we can help come up with a system of financial reporting that works for your nonprofit’s specific needs.