LEADer #10 - 2010 Winter
Healthy Food, Healthy Finances
Understanding financials and the 8 key indicators for boards to monitor
Monitoring financial statements comes with the job of being on a co-op board. Whether you relish the quarterly review of the financial statements, dread that agenda item, or couldn’t care less, it is an important board responsibility.
This issue of LEADer provides an overview on how to better fulfill this board duty. For those not yet fluent in financial analysis, we offer tips on what to focus on, as well as an explanation of the eight key financial indicators for boards to monitor.
Making Peace with Financial Statements – Philip Buri
“Our pitch to you is simple: financial statements gauge your co-op’s health, kind of like a thermometer. Once you learn how to read your co-op’s temperature, you’ll know whether things are okay, slightly off, or really sick.”
Eight Key Financial Indicators for Co-op Boards to Monitor – Lucinda Berdon and Paige Lettington
“By looking at these indicators over time, you’ll be able to see what is changing and how the co-op’s actions and results impact the indicators. Keep in mind that positive and negative trends are not necessarily good (or bad) indicators in and of themselves. Your analysis will depend on your goals, as well as the overall context.” We also provide a sample co-op financial statement and illustrations of the eight key indicators.
Trust and Verify: Don’t Monitor Alone – Martha Whitman
“Have you ever questioned why your board might contract for a professional audit of the co-op’s financial statements?” Here is an overview of why external audits or reviews are important, and some options for boards to consider.
By the Numbers: Board Decision Making Based on Financials – Marcia Shaw
“Most food co-ops are very conservative in their financial decisions. One could argue that that factor has been an important element in our longevity and success over the years. But in the business world, we need to use our resources wisely and to best business advantage.”
For More Information
Resources for further readings and reference.
Study Guide – Part 1 – Monitoring Financial Trends
Here’s an exercise to give everyone a hands-on opportunity to contribute to a chart showing the co-op’s financial indicators over the past two years (eight quarters). Follow these five steps for a group activity, or adapt to meet your group’s interests.
Study Guide – Part 2 – Assessing Financial Reports and Monitoring Systems
Do you get the financial information you need to fulfill your responsibilities? Here’s a simple checklist that can help you assess if your financial systems and the reports you’re getting meet your needs as a board.