According to the Merriam-Webster Dictionary, one of the definitions of “transparency” is “characterized by visibility or accessibility of information especially concerning business practices”. Transparency in your financial statement means it should be user friendly, clear, easily understandable and everything should be properly disclosed.
Importance of transparent financial statements
- Proactive transparency and communication are essential to organizational success. Stakeholder understanding and support is a direct result of transparency and open communication.
- A practice of continuous, transparent communication enables an organization to better respond to crises – such as physical disaster, fraud, or the sudden loss of a leader – and execute more robust crisis communication strategies.
- Establishing a culture of transparency is critical for effective governance, constituent engagement, and responsive management.
- Opening communication channels can help to establish meaningful and productive relationships with constituents. These relationships can have a significant impact on long-term performance.
Start with the Stakeholders
Know both internal stakeholders (board, committees, senior management, management team, staff, volunteer workers) and external stakeholders (customers, donors, funders, grantors, creditors, partners, government, public). It is imperative that you understand their needs and expectations. Information needs, communication methods, and information consumption patterns vary substantially from segment to segment. Meeting and exceeding the information needs for each of these groups is critical to delivering satisfaction.
If that’s too overwhelming, start by identifying your top two to three stakeholders. Determine what they need/want and go from there.
Strategic messages with financial statements
Make the data you have today more understandable and relatable; enhance the story and improve disclosure. When we think about financial statements we think revenue inputs and expense outputs but we need to be thinking more about outcomes.
Welter Consulting bridges people and technology together for effective solutions for nonprofit organizations. We offer software and services that can help you with your accounting needs. Please contact Welter Consulting at 206-605-3113 for more information.