As School Head, you likely have a Business Manager to handle your financial reports. Still, you are the Board's only employee, and it is your responsibility, with your Business Manager’s support, to keep the Board informed of the school’s financial footing. You will also be part of the Board’s strategic financial planning process, and you need to be prepared for that responsibility. You must be able to report financials accurately to your constituents.
In simple terms, financial statements are scorecards of your school’s health and viability. “The numbers in a company's financials reflect real world events,” according to 12 Things You Need to Know About Financial Reporting on the Investopedia Web site. “… learning certain fundamental financial statement analysis skills can be very useful—it's certainly not just for the experts. Over 30 years ago, businessman Robert Follet wrote a book titled How To Keep Score In Business (1987). His principal point was that in business you keep score with dollars, and the scorecard is a financial statement. He recognized that ‘a lot of people don't understand keeping score in business. They get mixed up about profits, assets, cash flow and return on investment.’”
In The Purpose of Financial Reporting in Business for Dummies (part of the whole Dummies series of how-to, in-plain-English books), it notes that “People read a financial report like a road map—to point the way and check how the trip is going.” Simply put, your financial reports need to show just how your school’s income (tuitions, other hard income from auxiliary services, as well as soft income from fund raising) stacks up against the cost to provide your program to your students.
The bottom line is you need to have enough income to pay for the program you provide. Are you equipped to interpret financial statements and determine your school’s financial health and appropriate goals? By knowing how to read a financial statement, you can make sure that the path you are guiding your school down is the right one.
The U.S. Securities and Exchange Commission offers a Beginners Guide to Financial Statements on its Web site. This primer covers balance statements, income statements, cash flow statements, and financial statement ratios and calculations. It’s a helpful start, but you will need to wade through some of the business focus to get to the essentials.
As Head, you need to understand what information is essential and what benchmarks are important. No, you are not the numbers cruncher per se, but your working knowledge of financial reporting gives you a solid foundation.
It also lets you confidently lead your team in predicting revenues and costs. Solid financial reporting will enhance your school’s marketing efforts via your annual report, your school’s newsletter, and access to your school’s IRS Form 990. You can check out GuideStart.com for a tour of Form 990.
Learn From a Pro
You’re an educator, not an accountant. You can learn from a seasoned private-independent school Business Manager at ISM Summer Institute. Toni Swan, Director of Operations and Finance at Athens Academy (GA) leads Financial Reporting for Heads, Directors, and Division Heads, July 14–17 in Stowe, VT. Toni, who also is an ISM Adjunct Consultant, will cover accounting terms, concepts, and processes; the relationship between statements of activities, financial position, and cash flow; financial statement analysis unique to independent schools and not-for-profits; financial ratios, benchmarking, and trends; and reporting to your constituents. Details and registration at isminc.com/si.
Come to Stowe early and bring your team for Strategic Financial Planning: Skills and Implementation, offered July 10–13. ISM Executive Consultant Walker Buckalew teaches Heads, Board members, Business Managers, and anyone else involved in financial planning, which you need to know to plan strategically for the school you want. You return to your school with the genesis of a financial plan based on ISM’s proven approach that will help you experience financial success now while positioning your school nicely for the future. Details and registration at isminc.com/si.
Additional resources for ISM Consortium Gold Members
To The Point Vol. 9 No. 9 Enhance School Marketing With Solid Financial Reporting
Ideas & Perspectives Vol. 29 No. 7 Your School’s Annual Report: A Strategic Financial Plan Reporter and Institutional Supporter
Ideas & Perspectives Vol. 36 No. 1 Mid-Year Financial Reports and Your Strategic Financial Plan
