After a long career in nonprofit finance, I’ve seen the same scene play out again and again: A group of smart, committed board members sit down at a meeting. They care deeply about the mission. They want to do a good job. They open the board packet, flip to the financials and quietly hope someone else at the table understands what’s going on.
Not because they’re not capable. Not because they don’t care. But because no one has ever really taught them how to read the story those numbers are trying to tell.
This video and article will show you how to lead financially by communicating clearly with the many audiences your nonprofit serves and how to turn financial statements into useful tools.
Watch the session
Here’s a 20-minute session where I walk through these ideas using real sample statements:
Financial leadership is everyone’s job
You don’t have to be the CFO to be a financial leader. If you’re a nonprofit executive, program director, development professional, board member, or emerging leader, part of your job is to communicate the financial condition of your organization to others.
And you’re not communicating to just one group. You have multiple audiences, each with different needs and levels of financial comfort.
Internal audiences might include:
- Staff and team members
- Executive or management team
- Finance committee
- Board of directors
- Volunteers
- Program recipients or participants
External audiences might include:
- IRS and state regulators (e.g., Attorney General’s office)
- Government grant program managers
- Foundations and corporate funders
- Individual donors
Each of these audiences needs something slightly different from your financial information: a different level of detail, a different format, and often a different cadence.
Effective financial leadership means tailoring the information: the right information, for the right audience, at the right time.
Stop assuming everyone “gets” the numbers
A common trap in nonprofits is assuming that people on the finance committee or board are automatically comfortable with financial statements.
Some may have finance or accounting backgrounds. Many do not. And even those who do may not understand the specifics of nonprofit finance: restricted vs. unrestricted revenue, grant timing, how various funding streams support different programs, or why your cash balance doesn’t match your available funds.
Most volunteer leaders joined your board because they are passionate about your mission, not because they love spreadsheets. But here’s the reality: every board and committee member still has a fiduciary responsibility to understand the financial life of the organization.
It’s not fair—or effective—to hand them dense reports and expect them to “just know” what it all means.
That’s where your leadership comes in. Your role is to:
- Remove the intimidation factor
- Provide context and translation
- Make the financial story accessible and usable
Start with orientation, not overwhelm
One of the most supportive things you can do for your board and committee members is to create a financial orientation process for new leaders.
When someone moves from being an “outsider” supporter to an “insider” board or committee member, they need context. Ideally, this orientation happens before their first meeting.
Financial orientation should sit alongside your broader board orientation, which might include:
- Your strategic plan (annual or multi-year)
- Current annual budget
- Organizational chart
- Program descriptions
- Philanthropy and fundraising overview
- History and impact of the organization
You likely already have much of this material. The goal is to pull it together in a way that helps new leaders see how the mission and the money connect.
To make it more engaging:
- Include photos of programs, participants (if appropriate), volunteers, and staff
- Highlight key milestones and impact stories
- Invite other leaders (development, program, executive director) to briefly present their areas
This helps new members understand the bigger picture and see that finance is not separate from the mission—it’s one of the tools that makes the mission possible.
From data dump to executive summary
Most accounting systems produce very standard reports:
- Income statement (statement of activities) – revenues and expenses, actual vs. budget, with variances
- Balance sheet (statement of financial position) – assets, liabilities, and net assets, compared point-in-time (e.g., this year vs. last year)
These are accurate and necessary. But if your board packet starts with pages of small numbers and no explanation, many people will mentally check out.
A simple, powerful fix is to start with an executive summary. Think of it as the front page story of your finances:
- Did we end the period with a surplus or deficit (net margin)?
- What drove our revenue? Where are we ahead or behind plan?
- How did expenses compare to expectations?
- What does the balance sheet tell us about liquidity and stability?
- Are there emerging opportunities or concerns we should pay attention to?
This one-page summary helps a board or finance committee member get up to speed quickly, even if they arrived at the meeting without having read every page in detail.
In the companion PDF, you’ll see a full example of an executive summary you can adapt for your organization.
Make your financial statements navigable
After your executive summary, present the full statements, but with better navigation and interpretation.
Two simple formatting changes can make a big difference:
1. Number the rows and label the columns
- Give each line item a row number: 1, 2, 3, etc.
- Label each column (Actual, Budget, % Change, $ Change) with letters: A, B, C, etc.
Now, during a meeting, you can say: “Let’s look at row 7, column C—total contributions, gifts, and grants.” Suddenly, everyone knows exactly where to look. You’re no longer asking them to hunt across a crowded page.
2. Add a notes column
Add a column on the right side of the statement with note numbers (1, 2, 3…). On a separate page, list those notes with plain-language explanations.
For example:
- Note 1 – Fundraising events revenue exceeded budget because of higher ticket sales and an additional sponsor.
- Note 2 – Program expenses are temporarily under budget due to delayed hiring; positions are expected to be filled next quarter.
This is where you turn numbers into stories. You’re not just reporting that something is different; you’re explaining why it’s different and what it means.
Use the same approach for the balance sheet:
- Number rows, label columns, and add notes that interpret changes in cash, receivables, payables, reserves, or net assets.
- Help people understand what has changed since last year and why it matters.
Your goal is to make it possible for a non-finance person to read the statements and feel oriented, not overwhelmed.
Highlight a few key ratios (and define them)
You don’t need dozens of metrics. A few key ratios can give your board a quick, meaningful snapshot:
- Current ratio – A measure of liquidity: current assets divided by current liabilities.
- Net margin – Surplus or deficit as a percentage of total revenue.
- Days’ cash on hand – How many days the organization could operate if no new cash came in.
When you present these, add a brief definition right next to each ratio. For example:
Days’ cash on hand: the number of days we could continue operations using our current cash if no additional revenue were received.
This way, every time your board sees these metrics, they’re also reinforced on what they mean.
Set your treasurer up for success
Often, the treasurer delivers the financial report at board meetings.
To support them—and to ensure the right messages are emphasized—partner with them ahead of time:
- Prepare talking points that highlight the key messages you want the board to remember.
- Walk through the executive summary and annotated statements together.
- Answer questions and clarify any confusing items.
This preparation:
- Gives your treasurer more confidence and clarity
- Ensures management’s perspective is communicated accurately
- Helps the board focus on the right conversations, not just on individual line items
Play the long game: build financial literacy
None of this is a one-and-done effort. Real change happens over time. Think of financial literacy training for your board and committees as a long-term investment in governance and leadership.
Some approaches that work well:
- Spend 20–30 minutes on a financial education topic at each meeting, or
- Dedicate one longer session per year focused entirely on financials
Use that time to:
- Explain how your statements are structured
- Walk through how to read an income statement and balance sheet
- Connect financial results to your strategy and impact
- Invite questions and normalize “I don’t understand this yet”
This can be led by your internal finance leader or an external facilitator who can bring an outside perspective. Either way, you’re helping volunteer leaders fulfill their fiduciary responsibilities and participate more fully in the organization’s financial decision-making.
Put this into practice with your own financials
If you’re ready to try this with your organization, here are some next steps you can take right away:
- Create or refine a financial orientation for new board and committee members.
- Add a one-page executive summary to your next financial packet.
- Reformat your income statement and balance sheet with row numbers, column letters, and notes.
- Choose 2–3 key ratios to track and explain in plain language.
- Partner with your treasurer to prepare clear talking points.
- Build regular financial literacy time into your board agenda.
Download the companion PDF guide
Nonprofit Financial Leadership and Communication: Annotating Your Financial Statements for Impact
To make this easier, this handout walks through this approach with concrete examples:
- Sample executive summary
- Annotated income statement and balance sheet
- Example notes and ratios page
- A framework you can adapt to your own organization
If you’d like help adapting this framework to your nonprofit—whether that’s designing a financial orientation, reworking your financial packets, or leading a financial literacy training—please connect with us.
Your board wants to be good stewards. Your volunteers want to make wise decisions. With clearer communication, better structure, and a bit of storytelling, you can give them the tools to do exactly that.
