Nonprofit boards rely heavily on financial reports like Profit and Loss (P&L) statements to make informed decisions. But understanding these reports, often filled with rows of numbers, can be a challenge for board members who may lack financial expertise. Data visualization techniques can transform P&L data into clear insights, revealing patterns and trends that help nonprofit board members grasp the organization’s financial health quickly and intuitively.
In a recent Data Storytelling Essentials workshop with local nonprofit leaders, I was asked to explore ways to make P&L reports more insightful to board members through data visualization. The workshop, hosted by Good Well Consulting, provided an opportunity to focus visualization efforts specifically on the communication of recurring financial data. While I've mostly shared the value of using data storytelling essentials to help motivate volunteers, staff, and funders, this provided a practical application for data driven decision making.
Using a case study from Youth Empowerment Network (YEN), a fictional nonprofit with an annual budget of $500,000, we focused on creating visualizations that uncover vital financial insights. This article shares some of the strategies we discussed, which you can use to make your nonprofit’s P&L data easier for your board to understand and act on.
Why P&L Data Visualization Matters for Nonprofit Boards
Traditional P&L statements list income and expenses over a period, typically comparing budgeted amounts with actuals. However, presented often in table format, these figures can make it difficult for board members to quickly identify key insights. Visualizing the data allows board members to see at a glance where the organization is on target, where it’s exceeding goals, and where it’s falling short.
Data visualization makes it easier to:
Highlight discrepancies between budgeted and actuals.
Track revenue and expense trends over time.
Identify areas of financial strength and vulnerability.
Quickly communicate financial health in an accessible way.
In the representational case of Youth Empowerment Network (YEN), these visualization strategies helped the board understand trends and make informed decisions to support the nonprofit’s mission.
Nonprofit organizations like YEN often face common financial challenges, from fluctuating donation levels to seasonal expenses. Visualization can clarify these patterns, helping boards respond effectively.
The YEN Scenario Case: P&L Challenges in a Nonprofit Context
Youth Empowerment Network (YEN) is a community organization dedicated to providing mentorship, academic support, and life skills training to at-risk youth. With an annual budget of $500,000, YEN relies on a mix of donations, grants, corporate sponsorships, and government funding to operate. Like many nonprofits, YEN faces several financial challenges:
1. Budget vs. Actual Revenue: Donations and fundraising results often fall short of projections, creating gaps between budgeted and actual revenue.
2. Seasonal Fluctuations: Fundraising and donation levels vary throughout the year, with some months producing a surplus and others resulting in a shortfall.
3. High Program Costs: Running youth-focused programs requires significant financial resources, including stipends for mentors, program materials, and operational expenses.
In the workshop, we explored how data visualization can bring these challenges to light for decision makers. Below are a before and after makeover of a P&L report using visualization strategies used in the workshop to transform YEN’s P&L data into actionable insights.
Visualization Techniques for P&L Reports: Data in Action
Data visualization practices and techniques bring substantial value to the communication of data by turning complex numbers into clear, actionable insights. With a variety of data visualization tools for your storytelling toolbox, you can tailor reports to highlight the most relevant insights for your organization’s unique financial landscape. Here are some impactful examples from the Youth Empowerment Network (YEN) that showcase the power of data visualization in P&L reporting.
Budget vs. Actuals Comparison (Bar Chart)
One of the primary questions YEN’s board had was: “Are we meeting our fundraising goals?” A simple bar chart comparing budgeted vs. actual donations across months made it easy to see whether YEN was on track. This chart showed a stark difference in actual donations versus budgeted goals for certain months, revealing gaps that needed attention.
In a typical P&L table, the difference between budgeted and actual donations might go unnoticed. But with a bar chart, it was clear where YEN’s fundraising was underperforming. With this insight helped YEN’s leadership might choose to focus on specific months or fundraising activities to make up the shortfall. A visual comparison like this is an excellent starting point for any nonprofit looking to highlight revenue discrepancies.
Total Revenue vs. Total Expenses (Line Graph)
For YEN, understanding the balance between total revenue and expenses was crucial, especially as they experienced seasonal fluctuations. By plotting total revenue and total expenses as a line graph, YEN’s board could instantly see how each month’s revenue compared to expenses.
This line graph revealed a pattern where expenses remained relatively consistent while revenue varied, with certain months showing a deficit. Seeing these fluctuations over time allowed the board to plan for low-income months, ensuring funds were available to cover operating costs even when donations were down. Total revenue vs. total expenses is one of the most effective visualizations for helping boards gauge overall financial health at a glance.
3. Net Income Over Time (Line Graph)
Net income, or the difference between total revenue and expenses, provides an essential snapshot of a nonprofit’s financial health. For YEN, tracking net income month-by-month in a line graph highlighted where the organization was financially strong and where they needed to tighten the budget.
The net income visualization helped YEN’s board spot months with higher deficits, indicating when revenue couldn’t keep pace with spending. This insight enabled the board to consider adjustments to their fundraising strategy or cost management practices. Nonprofits can use a net income line graph as a vital tool to identify surplus or deficit trends, helping leaders act before minor issues become significant financial risks.
Building an Effective P&L Report for Your Board
Once your P&L data has been visualized, the next step is to create a report that maximizes clarity and actionable insights for the board. During the workshop, I provided a checklist that attendees could use to build more effective P&L reports. This checklist can help ensure that financial reports are clear, accessible, and geared toward the needs of nonprofit leaders.
Checklist for Effective Data Visualization in P&L Reports
Include Both Budgeted and Actual Figures
Ensure each key revenue and expense category includes both budgeted and actual amounts, allowing the board to see discrepancies.
Highlight Key Discrepancies
Provide Visual Comparisons
Include Net Income Trends
Add a Narrative Summary:
By incorporating this checklist into your P&L reporting practices, you’ll provide a board report with a clearer, more actionable view of the organization’s finances.
Key Takeaways for Nonprofit Leaders
The goal of data storytelling in nonprofit finance is to make complex financial information accessible and meaningful. For board members, clear data visualization in P&L reports enables better oversight and decision-making.
Recap of Best Practices:
Use Bar Charts for Budget vs. Actual Comparisons: Helps boards quickly spot revenue shortfalls and surpluses.
Track Revenue vs. Expenses with Line Graphs: Allows easy comparison of total income and expenses, highlighting surplus and deficit months.
Visualize Net Income Over Time: Provides a month-by-month view of financial health, encouraging proactive planning.
By following just these simple practices, nonprofit leaders can more effectively communicate financial information, helping to empower boards to make data-driven decisions. They can also benefit from learning to build a comprehensive data story. Data storytelling combines visual elements, like the ones discussed, with data narrative skills to guide the audience through the insights step-by-step. In the workshop, we wrapped up with a final Data Story slide that brought YEN’s financial insights together, including data narrative and context that framed a call to action.
Mastering data storytelling goes beyond just choosing the right chart. It involves selecting, organizing, and presenting data so that the audience can quickly grasp the story each report tells. For nonprofit leaders looking to communicate complex information effectively, learning advanced data storytelling techniques—like narrative framing, communication planning, and eliminating visual noise —will add even greater clarity and impact to financial reporting.
Summary
A recent workshop with nonprofit leaders highlighted for me how data storytelling can transform P&L reporting for boards. The scenario case study served as a practical example, showing how nonprofits can use data visualization and data storytelling techniques to communicate key financial insights.
As nonprofits continue to face challenges in budgeting, fundraising, and cost management, effective P&L reporting becomes essential. By using data visualization techniques, nonprofit boards can see beyond the numbers, understanding the story behind the data and making decisions that align with their organization’s mission. Start by incorporating these techniques into your next P&L report, and watch how it transforms your board’s engagement and understanding.
Roseanna Galindo is Principal at Periscope Business Process Analysis, specializing in organizational learning and development. She is dedicated to advancing data literacy, enhancing healthcare experiences, and empowering volunteer leaders. Explore Roseanna’s expertise and insights on her blog, The Periscope Insighter, starting with the opening post, "Venn the Time is Right."
Roseanna offers a range of professional development services, including training workshops, keynote speaking, and executive coaching.
Visit PeriscopeBPA.com for more information or click on the button below to schedule a time to talk.
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