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Scott Menzel Product & User Experience Manager GuideStar Peter Kramer Manager Nonprofit Finance Fund June 5, 2014 Actionable Financial Analysis: Insights for Nonprofit Leaders

Actionable Financial Analysis: Insights for Nonprofit Leaders

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Actionable Financial Analysis: Insights for Nonprofit Leaders In an increasingly data-filled world, it can be difficult to sort through proliferating information to find what matters most. Nonprofit finance is no different. And because healthy finances enable social impact, much is at stake in clearly articulating nonprofit financial condition and resource needs. How can nonprofit leaders make sense of financial data to create a clear picture of their organization's financial situation? Join Nonprofit Finance Fund and GuideStar to learn more about Financial SCAN and how this data platform can add value to planning and decision-making conversations. Presenters: Peter Kramer, Manager, Nonprofit Finance Fund; and Scott Menzel, Product & User Experience Manager, GuideStar USA (moderator)

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Page 1: Actionable Financial Analysis: Insights for Nonprofit Leaders

Scott Menzel Product & User Experience Manager GuideStar Peter Kramer Manager Nonprofit Finance Fund June 5, 2014

Actionable Financial Analysis: Insights for Nonprofit Leaders

Page 2: Actionable Financial Analysis: Insights for Nonprofit Leaders

AGENDA

Introduction to Financial SCAN

New Feature Overview

Brief Online Tour

Case Analysis

Q & A

Page 3: Actionable Financial Analysis: Insights for Nonprofit Leaders

Effective Solutions

Sound Financial Health

Strong Organizations

Quality Programs

We believe that financial health supports impact

Page 4: Actionable Financial Analysis: Insights for Nonprofit Leaders

When it comes to finance, nonprofits face common challenges

Knowing which metrics to focus on for assessing

financial health

Having the time and skills to collect, parse, and

report financial data

Communicating about an organization’s financial

situation and resource needs

Page 5: Actionable Financial Analysis: Insights for Nonprofit Leaders

Financial SCAN at a Glance

What: Data platform for assessing nonprofit financial health and fostering dialogue among all stakeholders involved in making social impact

Who: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media

How: Private and public grantmakers/donors, nonprofit organizations, philanthropic advisors, consultants and media

WHAT

Data platform for assessing nonprofit financial health, making data driven decisions and informing grantmaker-grantee dialogue

WHO

Nonprofit organizations, private and public grantmakers, individual donors, philanthropic advisors, and consultants

HOW

Draws data directly and automatically from IRS Forms 990,* presenting complex information in an easy-to-analyze and communicate format (350K+ orgs)

*Note: Financial SCAN does not include data from Forms 990 EZ

Page 6: Actionable Financial Analysis: Insights for Nonprofit Leaders

What’s in a Financial SCAN?

Organizational Dashboard: Five years of key financial trends and ratios

Graphs & Explanatory Text: More detailed overview of an organization’s:

Expenses

Revenue

Profitability

Balance Sheet

Liquidity

Peer Comparison Dashboard: Select peer organizations for financial benchmarking

Page 7: Actionable Financial Analysis: Insights for Nonprofit Leaders

How are Nonprofit Leaders Using Financial SCAN?

Engaging staff, board members, and

funders in conversations about recent

dynamics and current needs

Visually mapping the organization’s financial

story

Providing historical context to inform

budgeting and planning

Benchmarking with peer organizations,

assessing financial similarities and

differences within and across sectors, sizes

and markets

“My organization never thought about strategically and proactively planning its financial future until I presented them with Financial SCAN.

Executive Director, Diversified Community Services,

Philadelphia, PA

Page 8: Actionable Financial Analysis: Insights for Nonprofit Leaders

Financial SCAN 2.0: New Features!

Excel Download

Peer Group Comparison

7 Day Nonprofit Access

Page 9: Actionable Financial Analysis: Insights for Nonprofit Leaders

Brief Online Demonstration

Page 10: Actionable Financial Analysis: Insights for Nonprofit Leaders

Key Considerations: What 990 data can and cannot do

990 data CAN help:

Illustrate your organization’s financial trajectory and recent

revenue, expense, and balance sheet dynamics

Show how your organization compares to its peers across

standardized fields

990 data CANNOT:

Provide the authoritative and most up-to-date financial picture

of your organization

Tie exactly to the information presented in an audit

Show revenue restrictions

Distinguish between operating dollars and capital dollars

Page 11: Actionable Financial Analysis: Insights for Nonprofit Leaders

Meet Today’s Case Organization: REAL WORLD SKILLS

MISSION: To prepare underserved youth for lasting

careers and self-sufficiency

PROGRAMS:

Personal & professional skill-building

Summer internship placement

Trade programs and certifications

RECENT DYNAMICS:

Steady yet modest growth

New location and dated equipment

Beginning strategic planning process

Page 12: Actionable Financial Analysis: Insights for Nonprofit Leaders

REAL WORLD SKILLS

Page 13: Actionable Financial Analysis: Insights for Nonprofit Leaders

Dashboard: Income Statement

Page 14: Actionable Financial Analysis: Insights for Nonprofit Leaders

Dashboard: Balance Sheet

Page 15: Actionable Financial Analysis: Insights for Nonprofit Leaders

Peer Comparison Dashboard:

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

1 2 3 4 5 6

Page 16: Actionable Financial Analysis: Insights for Nonprofit Leaders

Topics Explored in Financial SCAN Graphs:

Expense detail & composition

Revenue detail & composition

Profitability

Full cost of doing business

Asset composition

Depreciation of fixed assets

Liability composition

Liabilities as a % of assets

Liquidity

Page 17: Actionable Financial Analysis: Insights for Nonprofit Leaders

With the exception of 2008, surpluses and deficits have been close to breakeven

RWS has effectively managed this growth by

consistently covering its operating costs to achieve

marginal surpluses

But are surpluses adequate to build financial resilience?

Page 18: Actionable Financial Analysis: Insights for Nonprofit Leaders

RWS’s liquidity has fluctuated somewhat over the period, but has been consistently tight

Available liquidity represents a nonprofit’s ability to

handle risks and seize new opportunities.

Page 19: Actionable Financial Analysis: Insights for Nonprofit Leaders

Observations & Recommendations for REAL WORLD SKILLS

Observations from Financial SCAN:

Modest growth over last several years

Reliable mix of revenue sources

Relative to peers, little fixed assets

Tight liquidity constrains ability to innovate

Recommendations for Leadership:

Make business planning a part of strategy development;

build on historical strengths (e.g., reliable revenue,

surpluses in most years, etc.)

Consider amount and types of capital needed to build

liquidity and adapt to the changing job market

To meet resource needs, discuss areas of fiscal strength

and vulnerability with funders

Page 20: Actionable Financial Analysis: Insights for Nonprofit Leaders

Q&A

Page 21: Actionable Financial Analysis: Insights for Nonprofit Leaders

nonprofitfinancefund.org

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Thank you!

Peter Kramer

Manager, Advisory Services

Nonprofit Finance Fund

617-204-9772

[email protected]

To learn more:

www.guidestar.org/financialSCAN