Effective monthly financial reporting provides the Board of Directors of a health center with the information necessary to fulfill its fiduciary and oversight responsibilities and to supportinformed strategic decision-making. Financial reports should be clear, concise, and presented in a consistent format that emphasizes the organization's overall financial condition rather than detailed accounting information. A best practice is to begin each report with an executive dashboard highlighting key financial indicators such as operating margin, days cash on hand, revenue, expenses, budget performance, and patient volume, allowing board members to quickly assess organizational performance.
The following may be helpful in presenting financial data.
- Understanding your board of directors
- It is essential to understand the board members' backgrounds and financial literacy levels. Health center boards are made up of individuals from various backgrounds, including but not limited to healthcare, business, social services, and marketing. It is vital that financial data is tailored to their expertise, while providing adequate context for those less familiar with financial terminology. An example of a best practice is to ask the board whether the data they receive is easy to understand and whether there is another method of providing it that would make it easier for board members to fulfill their fiduciary oversight.
- Ensure clear and concise reporting
- At times, financial information to the board can be quite lengthy. Keep financial reports clear, concise, and easy to understand. Use plain language, avoid jargon, and present data in a logical and organized manner. Visual aids such as charts, graphs, and tables can help simplify information and make it more digestible. An example of a best practice is to use color in dashboards. For example, the color “red” may mean not meeting the goal, and the color “green” may mean meeting the goal the health center set.
- Focus on key metrics
- Health centers have a variety of financial metrics that provide an overall picture of how financially healthy an organization is.
- HRSA requires the following measures to be tracked:
- Grant Cost per Total Patient: How much federal funding was used per patient
- Total Cost per Total Patient: The cost to serve one patient
- Medical Cost per Medical Visit: The cost to serve one patient for a medical visit
- Health centers should also track additional financial measures which may include but are not limited to revenues and expenses, days in accounts receivable, days in accounts payable, days cash on hand, debt-to-equity ratios, etc. Regardless of the number of financial measures tracked, it’s important that the board receives metrics consistently and establishes baselines for comparison with national and state data. Some health centers choose to identify other health centers of similar size and complexity to compare financial metrics.
- Budget vs. actual analysis
- It is vital that the board of directors receives a budget vs. actual analysis to evaluate the financial position. Explain any significant variances and the impact they may have on a health center’s operation. The CFO (or whoever reports on the financial position) should provide insights into any variances, their causes, and whether budget adjustments are required.
- Encourage questions and discussion
- The culture of a health center board should foster an open and collaborative atmosphere that encourages open and active discussions with questions. It is important to provide explanations and address any concerns as they come up. Board members who feel their input is valued are more likely to engage in meaningful financial discussions.
Effectively presenting financial data is essential for the financial health and sustainability of a health center. By tailoring the presentation of financial data, focusing on key metrics, and encouraging open dialogue, the board's culture will foster transparency, engagement, and informed decision-making. Ultimately, these best practices will empower the board to make sound financial decisions that support a health center's mission and vision.
Vance Farrow is the Healthcare Industry Specialist for the Nevada Governor’s Office of Economic Development. He is responsible for supporting the recruitment, retention and expansion of healthcare professionals and businesses to strengthen the sector’s infrastructure within Nevada.
Mr. Farrow has received numerous gubernatorial appointments including Executive Commissioner for the Western Interstate Commission for Higher Education, in addition to the Governor’s Task Forces addressing Nevada Broadband, Graduate Medical Education, and Medicaid Innovation and Patient Protection Committees.
Prior to his position with the Nevada GOED, Mr. Farrow served as Chief of the Bureau of Cancer and Chronic Disease within the District of Columbia Department of Health, and has also served as Chief Operating Officer for an FQHC. He began consulting for MSCG in 2017 and has been reviewing and consulting with FQHCs and Lookalikes for more than 20 years.
