In Search for Balance & Purpose, Part II

So your books are balanced.  In fact, you have supported the major balances in your balance sheet and have traced the activity in your statement of revenues and expenses.  The reports are ready to be published.  Now what?  What is the purpose of these historical reports?

In my first article, I presented my opinion on balance and argued that it is simply a part of a larger process that leads to well-presented reports and financial statements.  In this article, I discuss the purpose and objective of these financial statements.

The higher purpose of a well-designed accounting system is to clearly portray the story of your current financial position.  This story, when explained properly, will allow you to gauge your current position with respect to your vision so you can shift your trajectory if necessary.

The vision you have established for the short- and long-term is not expected to travel a straight path.  Your organization will many times zig-zag its way from point A to point B and sometimes even take a few steps backward to reassess and re-energize.  Despite this non-linear trajectory, it is important that you keep your thumb on your location at all times.  Accurate and timely reports are the maps you employ to understand where you stand and to decide on necessary changes in course.

Your financial statements and other financial reports tell the story in a numerical format.  That story or map needs to be translated into a narrative explaining the “what,” “where” and the “why”.  Where is your cash flow?  Why are your revenues under budget?  What were the results of the most recent event?  Why did office supplies increase so much in the last quarter?  Your CFO needs to work through these questions with your program staff to create a detailed narrative for you. It is essential to hold the higher purpose of these reports by telling a clear and thorough story of your organization’s financial health and results of your decisions.

Now what?  You have a narrative and have gained an understanding of where you were as of last month.  Are you on target with respect to your short-term vision?  The narrative may not have all the answers on how to shift course, as it requires a collaborative effort between your CFO and you, the visionary leader.  Use the information you are presented to ask the relevant “what,” “where” and “why” questions.  Set new short-term goals.  Make those difficult decisions you have been pondering.  In short, use it to take action.

A well-implemented financial system is constantly monitoring financial information.  It also includes a disciplined approach to monthly sit downs to examine the closed financial reports, to understand the story they present and to make decisions based on their content.  Commit to the higher purpose of your financial system for extraordinary results.


Maribel Torres, CPA is CEO and Director of Client Accounting Services at Lumix CPAs and Advisors. She is a member of the Advisory Board for CPA.com and the AICPA Digital CPA Conference.  She also serves as a peer reviewer for the Maryland Association of Nonprofits Standards for Excellence Institute®. Follow Lumix on TwitterFacebook, and LinkedIn for the latest insights, news, and updates in accounting and advisory services.