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Ted Wilson | The Kibitzer
Blank Stares and Glazed Eyes
It Must Be the Treasurer’s Report

About Our Columnist

Ted Wilson has over 30 years' experience in marketing, fundraising, fiscal management, strategic planning and event planning in business, public and non-profit settings. On the theatrical side, he has spent over 35 years as an actor, director, writer, teacher, juggler, and mask-maker in educational, community, and professional settings. His firm, Concept To Execution, combines this diverse experience with his degrees in psychology and theater to offer specialized consulting services for community theaters and other community arts organizations, as well as creativity workshops, planning and marketing services for businesses and corporations.

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Treasurers reportDuring almost every volunteer board meeting I’ve been to there comes a moment of collective relief balanced by a modicum of trepidation, mixed with an excited sense of anticipation of what is next when the President of the board declares, “All those in favor of accepting the Treasurer’s Report, say ‘Aye’.”  “Ayes” all around.  “All those opposed?”  Silence.  “Okay, next item on the agenda…” In a subconscious effort to entrap any rabid financial disaster that might suddenly leap out of the vagaries in those confusing columns of debits and credits that were droned to death by the treasurer, the report is hurriedly filed away.   

Now, I’m not going to tell you how you can make the Treasurer’s Report the most exciting part of your board meeting.  But maybe I can nudge you into making it a whole lot more meaningful and, perhaps more importantly, more understandable and even user-friendlier to most of your board members.  To do this, the first thing I’m going to have to do is to insult the vast majority of the accountants and CPAs who may serve on your board, on your finance committee, or who charge you lots of money to help you keep track of your organizational finances. 

When it comes to tracking organizational finances, beware of accountants, CPAs, and volunteers or contractors who have taken a course or two on bookkeeping.  I would bet that 80 or 90 per cent of the time they’ve made a complete mess of your books.  If your Treasurer’s Report uses the term “Cost of Goods Sold” or one of the listings on the Chart of Accounts is “Ask Bob”, you could be in trouble.  Although I’ve changed the name in an effort to forever purge the perpetrator from my mind, I have experienced both those conditions and myriad muddled messes more.

Understand that accountants and CPAs have a very important place and can be exceptionally helpful.  But just like a well-delivered line during the run of a play, it’s all about timing.  And I’ll get to that timing in a moment, and maybe the accounting gods won’t summon up an IRS audit on me.

We should understand that most of us involved in any arts organization tend to be creative people.  Naturally, we want to find creative ways to do everything.  However, creativity and financial tracking said in the same breath could have dire consequences.  The first amendment may protect freedom of creative expression, but not when it comes to financial reporting. 

Pucker Up for a Little KISS

Here’s what you and your board need to know on a regular basis: 

  1. How much did it cost?
  2. How much did it earn?
  3. How much is left over? (Simple arithmetic:  A – B = C)

It really can be as simple as that.

Defining “It”

 “It” is everything and anything from the broadest measures of total cash outlays and incomes of the entire organization down to the minutia of the cost of pencils, or the income that came in when a patron gave you $8.00 for a $7.50 ticket, said, “Keep the change,” and disappeared into the crowded lobby before you could explain that dealing with the bookkeeping nightmare of that fifty cents cost more than the so-called contribution.  (Why that fifty cents is worth far more than its face value is beyond the scope of this kibitz, but might be worth exploring in future scribblings.) 

The fact of the matter is you don’t have discretion over what you will and will not keep track of.  Unless you want to end up in an Enron-style quagmire, you need to account for everything.  The discretion you have is how you choose to track it, and that includes deciding who needs to be aware of what and how often.  Now this is a tedious, detail-oriented process that really does have some elements of creative thinking involved.  Suffice it to say that you need to boil down all the organization’s financial transactions into categories that are clear and meaningful to your organization and to your board.  I always like to use categories that people use in the everyday life of the organization.  In the community arts organizations I ran, nobody except the accountants ever referred to an item as a “cost of goods sold” or discussed “depreciation” (which is a non-cash item, anyhow, so who cares?).  What we did talk about was the cost of program materials and supplies, advertising, ticket sales, class registrations, instructional fees, and much more.  Setting up a “chart of accounts”, which is, simply put, a list of all the “its”, sub-“its”, and side “its” you’re going to keep track of, is a bit of an intuitive process that reflects the financial life of your specific organization.  (Oh, boy!  I just felt the accounting gods cringe on that one!  Hang in there, oh lords of the ledger, I’ll be getting to the sacrifices we make to you momentarily.) 

Presenting “It”

If there is one place in financial reporting where creativity can be used, it’s here.  Certainly, someone needs to look at every single transaction on a regular basis, but that’s not the board.  (Who does this is a good question that has too many variables to answer, since it all depends upon the structure and scope of your organization.  At the very least, sooner or later, you will need to have a finance committee.  This month’s bonus comments are about the various functions of a finance committee vs. a financial development committee.)  The board needs to know the broad brush strokes of the coming and going of money.  The only details they need are those that may be helpful to understand something out of the ordinary or that which can shed meaningful light on a particular success or failure.  Those board members who want to get into the financial weeds on a regular basis may be excellent candidates for the finance committee. 

What I find to be effective is enough detail to cover the most important categories of costs followed by as many summaries or overviews as is appropriate.  For the closet bean counters, the more detailed reports tend to provide most of the information they want.  And even the most number-phobic artistes seem to comprehend the summaries and overviews. 

Tracking “It”

Okay!  You have your chart of accounts all figured out.  You have arranged every item that spends money and every item that earns money into groupings that make sense to you and your organization.  (A quick clarification for the sake of simplicity:  Yes, you need to track the cost of pencils, but for the sake of tracking, you might lump that cost with pens, paper, paperclips, and other expendable supplies in a broader category called “office supplies”, which might in turn be a part of an even broader category called “administrative costs”, which will be a part of an even larger category called “expenses”.)  So, you now know what your overviews and summaries are going to look like.  The mail comes and there’s a bill from the power company.  No problem!  You’ve got a category for that called Electric, which could be located in a collection of categories you called Utilities, which is found under another grouping you called Facility and that all comes under the broadest of the money-spending categories called Expenses.  Oh, yeh; you’ve got it goin’.  You pull out the checkbook, write the check, record it in the checkbook register, and mail the payment. 

So, now what?  How do you get that entry from the checkbook register into your tracking system?  And then, when it’s time to make up the reports, how do you get it from the tracking system to the reporting system?

Boy, there’s always a catch to these things. 

For argument’s sake, let’s start with a shoebox – no, I think a hatbox will be better; it’s bigger than a shoebox.  In fact, to be really organized, start with 12 hatboxes and using a permanent marker, label each one with the name of the month and the year.  On the lid, you have sections labeled with all your groupings and subsections of all your income and expense items.  Each time you record a check or a deposit in your checkbook register, you also record that expense or that income item on the lid of the hatbox in the proper section and put the receipt or deposit slip in the box.  At the end of the month, you add up all the entries in each section and subsection, writing the totals and subtotals at the bottom of each section on the hatbox lid.  It would be really organized to use a different color pen for that step!  Now, take all your expense totals, add them up and record that sum on the side of the box.  Then, add up all the income items on the top of the box and put that number over top of the expense total on the side of the box.  Subtract the expense total from the income total and in larger numbers, using a black marker if it’s a positive number and a red marker if it’s a negative number, write the difference.  Finally, at the board meeting when it comes time to do the Treasurer’s Report, just pass the hatbox around the table and let everyone look at whatever they want to look at.  If the big number on the side is red, suggest everyone throw some cash or other loose change inside the box.  Instead of listing this part of the meeting as “Treasurer’s Report”, change the name to “Passing the Hatbox”.  Very efficient.  It will double as a fundraiser.

Okay, okay – as much as I love this concept, there is a better way.  If your organization doesn’t have a computer, get one.  Next, get a spreadsheet program; I don’t care which one, just get one.  Most computers come with some sort of word processing and spreadsheet program, so you should be okay.  Next, get a good small business accounting program.  There are many, but the two most common ones are Peachtree and QuickBooks.  QuickBooks is the top small business accounting program and the one I have used.  If you go with QuickBooks, don’t mess around; just get the top of the line QuickBooks Pro.  It may cost you a little more up front, but the benefits you – and your accountant – will derive could be incalculable. 

I have found QuickBooks to be fairly intuitive, but there are manuals you can also buy for it.  There may also be some tech support when you first get it.  These accounting programs will also readily integrate with Microsoft Excel or other spreadsheet programs.  The easiest thing to do when tracking expenses is to use the check writing capabilities of the program.  That way, when you cut a check, it automatically records the check and puts it into all the right categories for you. 

Although you can generate reports from the accounting software, I found it more effective to use a spreadsheet program for most reports (the most common is Microsoft Excel, which is what I use).  That means you will need to make sure that the various accounts and line items are named the same thing in your accounting software and in your spreadsheet program. 

The Audit

Now we finally get to the CPAs and the accountants.  The annual audit is when you pay a professional – the CPA or accountant of your choice – to translate your meaningful, user-friendly, easy to understand financial tracking and reporting system into the foreign language of “standard accounting practices.”  Despite my sarcasm about it all, this is a very important process.  The point of it is that it provides a standard way of presenting business finances that will enable those who know the language to compare apples to apples.  It can also help to expose problems, trends, or even potential abuses that you might not otherwise see or be aware of. 

I remember when audits were dreaded ordeals before the use of accounting programs.  A team of bean counters would show up at your office, take over some space or other for days, maybe even weeks, and badger you for file after file after file.  No more of that.  If you have been diligent in your use of your accounting program, your annual audit should be pretty much a breeze. 

If I’ve gotten ahead of myself on this, let me not be presumptuous.  If you are not having an annual audit done, then you need to.  (Very small organizations can often get away with an audit every two years and can have it done by a volunteer “audit committee”, but the members of such a committee should have a certain amount of expertise as well as some arm’s length relationship with the board, the finance committee, the treasurer, and whoever is keeping the books.)  There is federal, and in some cases, state tax preparation that needs to be done, even in a “non-profit” setting.  Most of the accounting programs can track what you need for federal taxes and even have special audit reports for your accountant. 

A note about accountant selection:  Any accountant who says they won’t use or don’t know your accounting software, especially if it’s QuickBooks, fire them and get another one that does.  Make it a requirement of doing business with your organization, even if they are doing it pro bono.  That way, at audit/tax time, all you need to do is hand over a disk with your all your transactions on it and a file or two of other paperwork, and wait for the accountant to get back to you with the report! 

Bonus Comments

Finance vs. Financial DevelopmentFinance vs. Financial Development

I am often surprised by how many organizations try to merge the finance function with the financial development function.  I am rarely surprised when it doesn’t work.  Let me try to provide really simple definitions of each function.

Finance:  bean counting
Financial Development:  bean collecting

These two functions require vastly different skill sets and worldviews.  Bean counters are organizational canaries:  they start squawking and fluttering when financial trouble seems to be brewing.  Bean collectors, on the other hand, are the social butterflies that want to gather enough beans to quell the canary cacophony so they will sing in fiscal harmony.  Put another way, the bean counters use the fiscal facts of history (financial tracking and reporting) to project the fiscal fiction of the future (budgeting).  Bean collectors try to make those dreams come true.  It is the finance committee that ultimately guides and maintains the financial tracking and reporting systems and coordinates the budgeting process. 

Strictly speaking, financial development is the fundraising part of the organization.  Money derived from special fundraising events, cash and in-kind contributions, and grants are the bailiwick of an organization’s financial development function, which I like to think of as contributed income.   Money derived from activities associated with organizational mission (e.g., ticket sales, subscriptions, class registration fees, etc.) I like to think of as earned income.  At the risk of opening a can of worms that would require a fully developed treatment of its own, there may also be another source of income that the taxing authorities refer to as unrelated business income (UBI) and is subject to taxation.  Examples of UBI sources might include the on-going operation of a café at a museum or a bar at a theatre.  With the enormous growth of the non-profit sector causing the contributions pie to be cut into smaller and smaller pieces, I happen to believe that non-profit entities need to take a look at UBI activities in order to diversify their income stream. 

So, when you are reorganizing your organization, set up a finance committee and a separate financial development committee.  And while you’re at it, when you set up your marketing committee, you need to break down its internal functions into two parts:  sales and marketing.  But, once again, that’s a tangent that needs a full discussion on it’s own! 



I can’t tell you how many times I’ve heard, “What do you mean I can’t spend that much on supplies!  It’s in my budget!”  Make that "was"; reality can be brutal.

Budgets are not fact.  They are darts, sometimes thrown blindfolded at unknown targets, that will most likely miss their marks.  Organizational budgets are the financial fantasies for some measure of future time, most often, a year.  (They might also be project budgets in which the time frame could be a little less definite.)

On the other hand, financial tracking is a factual financial record of history.  Time travelers warn of the devastating consequences of going back in time and changing history.  So do accountants and grand juries.  You can fudge the future all you want, but if you try to fudge the past, one word comes to mind:  Enron. 

Good financial tracking and reporting includes measuring the history of what has actually been spent and earned against the fantasy of budget projections.  (Many of the accounting software programs have a way of integrating your budget numbers into the program.  That means it’s very important to make sure the labels you use for budgeting are the same as you use for tracking and reporting purposes.)  By comparing actual expenses against your budget, you can tell how off the mark you have been, which will allow you to make any necessary adjustments you need in cutting costs, finding new ways to generate income, or a combination of the two.  Over time, a period of years, this process of comparing the history of actual numbers to the fantasy of your dart-throwing will allow you to become more clairvoyant when planning your annual budget. 


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