Who we are
Quantum is a Melbourne based business consultancy that specializes in the facilitation of finance training for directors of not-for-profit Boards
What we do
We facilitate tailored boardroom finance workshops and mentoring services that focus on:
- Understanding finance and audit-related Corporate Governance obligations
- Finance terminology and reading and Interpreting Financial Statements
- Utilising strategic financial KPIs
- Assessing risk and financial performance
- Analysing the financial impact of strategic decisions
Accurate identification of the professional development needs of Directors and Board members is central to our role in building board capability. We invest time to consult with our clients and tailor our workshops to meet the specific needs of the Board.
A checklist for developing Financial KPIs for Not-for-Profit Boards
Specifically written to assist Not for profit Boards to identity financial KPIs as part of a financial reporting framework.
- Make them relevant
Clearly, it is not as simple as adopting private sector financial KPIs and remember the rules of ‘financial gravity’ apply to all industry sectors; remaining solvent is the most obvious example.
Focus on the governance imperatives for your Board; start with a discussion of the strategic financial risks for the organisation, for example uncertainty associated with government grants, future pressure on infrastructure such as ICT systems and service delivery capability.
- Consider a Dashboard approach
Would anybody seriously consider driving a vehicle without a dashboard or dials on that dashboard? Most unlikely!
A financial KPI dashboard concept has the potential to provide clarity for both the Board and the Management team about the financial “dials” required and how they are arranged (presented).
Ask Management to provide the Board with advice regarding a suitable Dashboard structure including some presentation options such as graphs and traffic light indicators.
- Keep them in the Governance realm
A good way of ensuring that we keep our focus on governance rather than operational matters is to think about which financial KPI’s we need for Strategy, Risk, Policy and Performance oversight. For example, an annual leave balance KPI would relate to Policy and Risk, a liquidity KPI would relate to risk.
- Focus on the key financial dimensions
It is important that the financial KPIs your Board adopts provide a balanced coverage of the key financial dimensions of your Financial Statements.
Start by looking at the key financial elements: In the Profit and Loss Statement focus your KPIs on Revenue, Operating Expenses and the Surplus (or Deficit), in the Balance Sheet concentrate your KPIs on Assets, Liabilities, Shareholders’ Equity and in the Cashflow Statement develop KPIs that relate to Opening and Closing Cash positions, Net Cash from Operating, Investing and Financing Activities.
- Set Financial KPI Targets
Use financial KPI’s to drive financial performance and long-term financial sustainability. This can be achieved through the Strategic Planning process and by ensuring that the financial KPI targets are integrated as part of a Balanced Scorecard KPI matrix.
Ask the Management team to advise the Board about appropriate targets. Financial KPI and industry benchmark data for the Not for Profit sector is not easy to find, but why not use some ‘rule of thumb’ benchmarks and adjust these to make them appropriate for your organisation.
Make sure that your Board utilises the knowledge, skills, expertise and experience of the CFO to develop the right benchmarks for your Not for Profit industry context.
- Get the right number of Financial KPIs
Avoid lighting up your Financial KPI Dashboard like a passenger jet console. Keep it simple. Too many Financial KPI’s can create confusion; better to keep it strategic. Aim for no more than 3 to 4 Strategic level KPIs and 2 to 3 Financial Performance and Compliance related KPIs.
- And finally; please don’t reinvent the wheel!
There are a growing number of Not-for-profit Boards that are turning their attention to developing their own unique Financial Reporting Dashboard. Use your industry network of fellow Directors to discover examples of good practice for your sector and ask your CFO to explore commercially available (or even free!) Financial KPI tools that could be tailored to meet the needs of your Not for Profit Board.