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North CarolinaTheatre Conference
Financial Storytelling
Presented by Dave OlsonUniversity of North Carolina School of the Arts
July, 2011
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A c c o u n t F U N i n g
A c c o u n t i n g
=
Dave’s summer, so far
Seminar - learned two things
1. Engage the audience, right from the top
2. Use simple pictures to tell your story (preferably hand-drawn)
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Next, I thought I’d try regular pictures – last year, Shane included a picture of his dog, so I thought I’d follow suit and try that this year, so…
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Our goal today
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1, 9, 3, 4, 6,5, 7, 8,2,1
Who might want to know our story?
Funders
Bankers
The press
Employees
The community
Management!
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What kinds of stories? Assess the financial/operational
health of an organization
Strong vs. weak financial position?
Long-term viability?
Is the company a good investment?
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What types of information? Put yourself in the
shoes of a foundation grant reviewer who is evaluating your organization
What kinds of questions would they like to know about the company’s financial position?
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Financial storytelling
Can also help to make better management decisions!
In the end, we can put all of these types of questions/observations together to begin to “tell a story”
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Sources of info for stories Stories can be based on all kinds of
different sources of info Budgets Audits Monthly reports 990’s Industry benchmarks
Always make sure that you’re comparing apples-to-apples info however!!
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A quick example
The All-Pippin Dinner Theatre Audit Results - 2001 - 2009
What story does this tell?
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First, we must know the language
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Where the story begins
TERMS (of Endearment)
Balance sheet: ALOE
Income statement: RENI
FASB terminology
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The balance sheet
Shows the accumulated resources of the co. – its financial position At a given point in time (ex:
12/31/11)
The value of the business after paying all its bills
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The balance sheet: ALOE
A = L + OE(or: A – L = OE)
A = Assets (stuff you own)
L = Liabilities (stuff you owe others)
OE = Owner’s equity (net value of the business)
Examples?(c) David L. Olson - 2011 17
The income statement
Shows the results of operations over a period of time
vs. the balance sheet, which is at a single point in time
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The Income Statement
Revenue - Expenses = Net Income
or profit/(loss)
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The story continues – our goals Understand the nature of:
Resources and debts (balance sheet) Operations (Income statement)
Develop tools for interpreting the numbers
Identifying relationships between #’s #’s always mean more when compared
to something else
Asking “why”?
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Summary of key tools %’s Ratios Totals Comparisons and
trends Unusual items Audit info Benchmarking Relationships
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Quick review of percents
% of total
Used for lists or columns of #’s
Ex: a list of expenses
Formula = item/total
% change
Looking for the change between two #’s
Formula = Amt of change/old #
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Percent of total – pie chart
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What’s the story here?
Percent of total example
Salaries $60,000 (60/100=60%)Rent $20,000 (20/100=20%)Insurance $15,000 (15/100=15%)Other $ 5,000 (5/100=5%) Total $100,000 (100/100=100%)
What’s the story here?
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Percent change example
‘10 ‘11 Diff
Ticket price: $100 $150 +$50
What’s the difference?
What’s the old #?
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$50
$100
50/100=.5 or a 50%
Ratios
Just a fancy word for %
“Something” relative to “something else” A relationship
Formula: “something”/”something else”
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Some key ratios Income ratios
Expense ratios
Efficiency ratios
Working capital ($)
Current ratio (%)
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Income ratios
% earned vs. % contributed
Range of 40% - 60% in either direction not unusual
Why important?
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Expense ratios From the income statement (audited)
Program expenses (min. 70%) Management and general expenses
(15%) Fundraising expenses (15%)
Statement of Functional Expenses Lists exp’s by the nature of the
expenditure
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Efficiency ratios How efficient are you at generating
a certain type of revenue
Compare the cost of generating the revenue, to the revenue generated
Can do this for many types of revenue sources
Efficiency ratio formula Expense/revenue
Should give you some % <1 Why?
Gives you “cost to raise (or earn) $1” of revenue
Key ratios: Development, marketing
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Efficiency ratio example
Total development expense: $20,000 Total development income: $100,000
$20,000/$100,000 = 20%
Now, you can compare to other org’s
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Other storytelling tools Comparisons, trends, and
relationships
Unusual items
Audit info
Benchmarking against other organizations
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Items to always check Cash
Pledges
Debt
Net income
Net asset balances What does a negative balance here mean?
Any relationship here?
Deficits – do you know the difference?
Annual deficit
Accumulated deficit
Structural deficit
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Relationship example - cash Key: double entry bookkeeping!
Changes are always caused by something else
Let’s say that cash doubles from yr 1 to yr 2
What are four reasons cash could double from the prior year?
Always ask “why”
Benchmarking (and a caveat!) What’s the goal of benchmarking?
Be aware of context!! Your circumstances may be different
than others in the group
Data collection, reporting and classification
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Industry benchmarking
Theatre Facts www.tcg.org Non-profit professional theatres that
are members of TCG Select “Tools and Research”
Compare their %’s to yours By budget group size
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Theatre Facts (2009)
Part 1: Trend Theatres The same theatres (112) that have
reported over the last 5 years
Part 2: Participating Theatres Theatres that responded to this year’s
survey
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Theatre Facts “group” budgets
Group 1: $10 million +Group 2: $5,000,000 - $9,999,999Group 3: $3,000,000 - $4,999,999Group 4: $1,000,000 - $2,999,999Group 5: $ 500,000 - $ 999,999Group 6: $ 499,999 – $ 999,999
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Let’s take a quick lookTheatreFacts_2009.pdf
Average earned Inc: p. 24, Table 15 (both $ and %)
Key efficiency ratios: p. 26, Table 16
Average expenses: p. 27, Table 17, 18
Average $ gift, by source: p. 29, Table 20
Average contrib’d inc.: p. 30, Table 22
Key operating benchmarks: p. 33, Table 25(c) David L. Olson - 2011 42
Dave, let’s see this stuff in action! Now, let’s really put the FUN in
accountFUNing!
All-Pippin Dinner Theatre Audit.pdf
ArkansasSymphAuditFS.pdf
(Work from the “unrestricted fund” only)
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Contact me
E-mail: [email protected]
Twitter: ArtsMgmtGuy
LinkedIn: Dave Olson (UNCSA)
Cell: 612-799-1490
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