North Carolina Theatre Conference Financial Storytelling Presented by Dave Olson University of North Carolina School of th...
(c) David L. Olson - 2011 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 <ul><li>Seminar - learned two things </li></ul><ul><ul><li>Engage the audience, right from the top <...
(c) David L. Olson - 2011
(c) David L. Olson - 2011 Next, I thought I’d try regular pictures – last year, Shane included a picture of his dog, so I ...
(c) David L. Olson - 2011
Our goal today (c) David L. Olson - 2011 1, 9, 3,  4, 6,5, 7, 8,2,1
Who might want to know our story? <ul><li>Funders </li></ul><ul><li>Bankers </li></ul><ul><li>The press </li></ul><ul><li>...
What kinds of stories? <ul><li>Assess the financial/operational health of an organization </li></ul><ul><li>Strong vs. wea...
What types of information? <ul><li>Put yourself in the shoes of a foundation grant reviewer who is evaluating your organiz...
Financial storytelling <ul><li>Can also help to make better management decisions! </li></ul><ul><li>In the end, we can put...
Sources of info for stories <ul><li>Stories can be based on all kinds of different sources of info </li></ul><ul><ul><li>B...
A quick example <ul><li>The All-Pippin Dinner Theatre Audit Results - 2001 - 2009 </li></ul><ul><li>What story does this t...
First, we must know the language (c) David L. Olson - 2011
Where the story begins <ul><li>TERMS (of Endearment) </li></ul><ul><li>Balance sheet:  ALOE </li></ul><ul><li>Income state...
The balance sheet <ul><li>Shows the accumulated resources of the co. – its financial position </li></ul><ul><ul><li>At a g...
The balance sheet:  ALOE <ul><li>A = L + OE </li></ul><ul><li>(or:  A – L = OE) </li></ul><ul><li>A  = Assets (stuff you o...
The income statement <ul><li>Shows the results of operations over a period of time </li></ul><ul><li>vs. the balance sheet...
The Income Statement <ul><li>R evenue </li></ul><ul><li>  -  E xpenses </li></ul><ul><li>  =  N et  I ncome </li></ul><ul>...
The story continues – our goals <ul><li>Understand the nature of:  </li></ul><ul><ul><li>Resources and debts (balance shee...
(c) David L. Olson - 2011
Summary of key tools <ul><li>%’s </li></ul><ul><li>Ratios </li></ul><ul><li>Totals </li></ul><ul><li>Comparisons and trend...
Quick review of percents <ul><li>% of total </li></ul><ul><li>Used for lists or columns of #’s </li></ul><ul><li>Ex:  a li...
Percent of total – pie chart (c) David L. Olson - 2011 What’s the story here?
Percent of total example <ul><li>Salaries   $60,000    (60/100=60%) </li></ul><ul><li>Rent   $20,000    (20/100=20%) </li>...
Percent change example <ul><li>‘ 10  ‘11  Diff </li></ul><ul><li>Ticket price:  $100  $150  +$50 </li></ul><ul><li>What’s ...
Ratios <ul><li>Just a fancy word for % </li></ul><ul><li>“ Something” relative to “something else” </li></ul><ul><ul><li>A...
Some key ratios <ul><li>Income ratios </li></ul><ul><li>Expense ratios </li></ul><ul><li>Efficiency ratios </li></ul><ul><...
Income ratios <ul><li>% earned vs. % contributed </li></ul><ul><li>Range of 40% - 60% in either direction not unusual </li...
Expense ratios <ul><li>From the income statement (audited) </li></ul><ul><ul><li>Program expenses  (min. 70%) </li></ul></...
Efficiency ratios <ul><li>How efficient are you at generating a certain type of revenue </li></ul><ul><li>Compare the cost...
Efficiency ratio formula <ul><li>Expense/revenue </li></ul><ul><ul><li>Should give you some % <1 </li></ul></ul><ul><ul><l...
Efficiency ratio example <ul><li>Total development expense:  $20,000 </li></ul><ul><li>Total development income:  $100,000...
Other storytelling tools <ul><li>Comparisons, trends, and relationships </li></ul><ul><li>Unusual items </li></ul><ul><li>...
Items to always check <ul><li>Cash </li></ul><ul><li>Pledges </li></ul><ul><li>Debt </li></ul><ul><li>Net income </li></ul...
Deficits – do you know the difference? <ul><li>Annual deficit </li></ul><ul><li>Accumulated deficit </li></ul><ul><li>Stru...
Relationship example - cash <ul><li>Key:  double entry bookkeeping! </li></ul><ul><ul><li>Changes are  always  caused by s...
Benchmarking (and a caveat!) <ul><li>What’s the goal of benchmarking? </li></ul><ul><li>Be aware of context!! </li></ul><u...
Industry benchmarking <ul><li>Theatre Facts  www.tcg.org </li></ul><ul><ul><li>Non-profit professional theatres that are m...
Theatre Facts (2009) <ul><li>Part 1:  Trend Theatres </li></ul><ul><ul><li>The same theatres (112) that have reported over...
Theatre Facts “group” budgets <ul><li>Group 1: $10 million + </li></ul><ul><li>Group 2:  $5,000,000 - $9,999,999 </li></ul...
Let’s take a quick look <ul><li>TheatreFacts_2009.pdf </li></ul><ul><li>Average earned Inc: p. 24, Table 15 (both $ and %)...
Dave, let’s see this stuff in action! <ul><li>Now, let’s really put the  FUN  in account FUNi ng! </li></ul><ul><li>All-Pi...
Contact me <ul><li>E-mail:  [email_address] </li></ul><ul><li>Twitter:  ArtsMgmtGuy </li></ul><ul><li>LinkedIn:  Dave Olso...
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Financial storytelling

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  • You’ll be happy to hear, I gave up on the drawing – this would have taken forever. I may use a picture from time-to-time however… Shane showed us a picture of his dog at last year’s conference, so, to get started, I thought that I would do the same this year… So, here’s a picture of Shane’s dog!!
  • How? What types of information ? How much operating cash do they have? How much debt are they carrying? Do they have enough cash to pay the bills? Are they breaking even or losing $$, each year? Where are their revenues coming from? Where are they spending their $$? Are any of their revenue streams “at-risk”? Are they carrying an accumulated deficit in their net assets? How efficient are they in the running of various aspects of their operation?
  • A lot of unique terms, concepts in accounting – must know what the “industry” is referring to
  • Use tools to tell the story
  • % revenue split % expense split (70/15/15) Efficiency ratios : Fdr exp/fdr inc Mktg exp/Tkt sales Working capital : current assets – current liabilities – what does this tell us? Current ratio : current assets/current liabilities: proportion of curr assets to curr liabilities
  • Look to: Decreases in pledges receivable? Increase in bank borrowings? Big increase in unearned ticket sales? Big gain on the P &amp; L?
  • Shows where you fall relative to the group
  • Financial storytelling

    1. 1. North Carolina Theatre Conference Financial Storytelling Presented by Dave Olson University of North Carolina School of the Arts July, 2011
    2. 2. (c) David L. Olson - 2011 A c c o u n t F U N i n g A c c o u n t i n g =
    3. 3. Dave’s summer, so far <ul><li>Seminar - learned two things </li></ul><ul><ul><li>Engage the audience, right from the top </li></ul></ul><ul><ul><li>Use simple pictures to tell your story (preferably hand-drawn) </li></ul></ul>(c) David L. Olson - 2011
    4. 4. (c) David L. Olson - 2011
    5. 5. (c) David L. Olson - 2011 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…
    6. 6. (c) David L. Olson - 2011
    7. 7. Our goal today (c) David L. Olson - 2011 1, 9, 3, 4, 6,5, 7, 8,2,1
    8. 8. Who might want to know our story? <ul><li>Funders </li></ul><ul><li>Bankers </li></ul><ul><li>The press </li></ul><ul><li>Employees </li></ul><ul><li>The community </li></ul><ul><li>Management! </li></ul>(c) David L. Olson - 2011
    9. 9. What kinds of stories? <ul><li>Assess the financial/operational health of an organization </li></ul><ul><li>Strong vs. weak financial position? </li></ul><ul><li>Long-term viability? </li></ul><ul><li>Is the company a good investment? </li></ul>(c) David L. Olson - 2011
    10. 10. What types of information? <ul><li>Put yourself in the shoes of a foundation grant reviewer who is evaluating your organization </li></ul><ul><li>What kinds of questions would they like to know about the company’s financial position? </li></ul>(c) David L. Olson - 2011
    11. 11. Financial storytelling <ul><li>Can also help to make better management decisions! </li></ul><ul><li>In the end, we can put all of these types of questions/observations together to begin to “tell a story” </li></ul>(c) David L. Olson - 2011
    12. 12. Sources of info for stories <ul><li>Stories can be based on all kinds of different sources of info </li></ul><ul><ul><li>Budgets </li></ul></ul><ul><ul><li>Audits </li></ul></ul><ul><ul><li>Monthly reports </li></ul></ul><ul><ul><li>990’s </li></ul></ul><ul><ul><li>Industry benchmarks </li></ul></ul><ul><li>Always make sure that you’re comparing apples-to-apples info however!! </li></ul>(c) David L. Olson - 2011
    13. 13. A quick example <ul><li>The All-Pippin Dinner Theatre Audit Results - 2001 - 2009 </li></ul><ul><li>What story does this tell? </li></ul>(c) David L. Olson - 2011
    14. 14. First, we must know the language (c) David L. Olson - 2011
    15. 15. Where the story begins <ul><li>TERMS (of Endearment) </li></ul><ul><li>Balance sheet: ALOE </li></ul><ul><li>Income statement: RENI </li></ul><ul><li>FASB terminology </li></ul>(c) David L. Olson - 2011
    16. 16. The balance sheet <ul><li>Shows the accumulated resources of the co. – its financial position </li></ul><ul><ul><li>At a given point in time (ex: 12/31/11) </li></ul></ul><ul><li>The value of the business after paying all its bills </li></ul>(c) David L. Olson - 2011
    17. 17. The balance sheet: ALOE <ul><li>A = L + OE </li></ul><ul><li>(or: A – L = OE) </li></ul><ul><li>A = Assets (stuff you own) </li></ul><ul><li>L = Liabilities (stuff you owe others) </li></ul><ul><li>OE = Owner’s equity (net value of the business) </li></ul><ul><li>Examples? </li></ul>(c) David L. Olson - 2011
    18. 18. The income statement <ul><li>Shows the results of operations over a period of time </li></ul><ul><li>vs. the balance sheet, which is at a single point in time </li></ul>(c) David L. Olson - 2011
    19. 19. The Income Statement <ul><li>R evenue </li></ul><ul><li> - E xpenses </li></ul><ul><li> = N et I ncome </li></ul><ul><li>or profit/(loss) </li></ul>(c) David L. Olson - 2011
    20. 20. The story continues – our goals <ul><li>Understand the nature of: </li></ul><ul><ul><li>Resources and debts (balance sheet) </li></ul></ul><ul><ul><li>Operations (Income statement) </li></ul></ul><ul><li>Develop tools for interpreting the numbers </li></ul><ul><li>Identifying relationships between #’s </li></ul><ul><ul><li>#’s always mean more when compared to something else </li></ul></ul><ul><li>Asking “why”? </li></ul>(c) David L. Olson - 2011
    21. 21. (c) David L. Olson - 2011
    22. 22. Summary of key tools <ul><li>%’s </li></ul><ul><li>Ratios </li></ul><ul><li>Totals </li></ul><ul><li>Comparisons and trends </li></ul><ul><li>Unusual items </li></ul><ul><li>Audit info </li></ul><ul><li>Benchmarking </li></ul><ul><li>Relationships </li></ul>(c) David L. Olson - 2011
    23. 23. Quick review of percents <ul><li>% of total </li></ul><ul><li>Used for lists or columns of #’s </li></ul><ul><li>Ex: a list of expenses </li></ul><ul><li>Formula = item/total </li></ul><ul><li>% change </li></ul><ul><li>Looking for the change between two #’s </li></ul><ul><li>Formula = Amt of change/old # </li></ul>(c) David L. Olson - 2011
    24. 24. Percent of total – pie chart (c) David L. Olson - 2011 What’s the story here?
    25. 25. Percent of total example <ul><li>Salaries $60,000 (60/100=60%) </li></ul><ul><li>Rent $20,000 (20/100=20%) </li></ul><ul><li>Insurance $15,000 (15/100=15%) </li></ul><ul><li>Other $ 5,000 (5/100=5%) </li></ul><ul><li>Total $100,000 (100/100=100%) </li></ul><ul><li>What’s the story here? </li></ul>(c) David L. Olson - 2011
    26. 26. Percent change example <ul><li>‘ 10 ‘11 Diff </li></ul><ul><li>Ticket price: $100 $150 +$50 </li></ul><ul><li>What’s the difference? </li></ul><ul><li>What’s the old #? </li></ul><ul><li>What’s the % change? </li></ul>(c) David L. Olson - 2011 $50 $100 50/100=.5 or a 50%
    27. 27. Ratios <ul><li>Just a fancy word for % </li></ul><ul><li>“ Something” relative to “something else” </li></ul><ul><ul><li>A relationship </li></ul></ul><ul><li>Formula: “something”/”something else” </li></ul>(c) David L. Olson - 2011
    28. 28. Some key ratios <ul><li>Income ratios </li></ul><ul><li>Expense ratios </li></ul><ul><li>Efficiency ratios </li></ul><ul><li>Working capital ($) </li></ul><ul><li>Current ratio (%) </li></ul>(c) David L. Olson - 2011
    29. 29. Income ratios <ul><li>% earned vs. % contributed </li></ul><ul><li>Range of 40% - 60% in either direction not unusual </li></ul><ul><li>Why important? </li></ul>(c) David L. Olson - 2011
    30. 30. Expense ratios <ul><li>From the income statement (audited) </li></ul><ul><ul><li>Program expenses (min. 70%) </li></ul></ul><ul><ul><li>Management and general expenses (15%) </li></ul></ul><ul><ul><li>Fundraising expenses (15%) </li></ul></ul><ul><li>Statement of Functional Expenses </li></ul><ul><ul><li>Lists exp’s by the nature of the expenditure </li></ul></ul>(c) David L. Olson - 2011
    31. 31. Efficiency ratios <ul><li>How efficient are you at generating a certain type of revenue </li></ul><ul><li>Compare the cost of generating the revenue, to the revenue generated </li></ul><ul><li>Can do this for many types of revenue sources </li></ul>(c) David L. Olson - 2011
    32. 32. Efficiency ratio formula <ul><li>Expense/revenue </li></ul><ul><ul><li>Should give you some % <1 </li></ul></ul><ul><ul><li>Why? </li></ul></ul><ul><li>Gives you “cost to raise (or earn) $1” of revenue </li></ul><ul><li>Key ratios: Development, marketing </li></ul>(c) David L. Olson - 2011
    33. 33. Efficiency ratio example <ul><li>Total development expense: $20,000 </li></ul><ul><li>Total development income: $100,000 </li></ul><ul><li>$20,000/$100,000 = 20% </li></ul><ul><li>Now, you can compare to other org’s </li></ul>(c) David L. Olson - 2011
    34. 34. Other storytelling tools <ul><li>Comparisons, trends, and relationships </li></ul><ul><li>Unusual items </li></ul><ul><li>Audit info </li></ul><ul><li>Benchmarking against other organizations </li></ul>(c) David L. Olson - 2011
    35. 35. Items to always check <ul><li>Cash </li></ul><ul><li>Pledges </li></ul><ul><li>Debt </li></ul><ul><li>Net income </li></ul><ul><li>Net asset balances </li></ul><ul><ul><li>What does a negative balance here mean? </li></ul></ul>(c) David L. Olson - 2011 Any relationship here?
    36. 36. Deficits – do you know the difference? <ul><li>Annual deficit </li></ul><ul><li>Accumulated deficit </li></ul><ul><li>Structural deficit </li></ul>(c) David L. Olson - 2011
    37. 37. Relationship example - cash <ul><li>Key: double entry bookkeeping! </li></ul><ul><ul><li>Changes are always caused by something else </li></ul></ul><ul><li>Let’s say that cash doubles from yr 1 to yr 2 </li></ul><ul><ul><li>What are four reasons cash could double from the prior year? </li></ul></ul><ul><li>Always ask “why” </li></ul>(c) David L. Olson - 2011
    38. 38. Benchmarking (and a caveat!) <ul><li>What’s the goal of benchmarking? </li></ul><ul><li>Be aware of context!! </li></ul><ul><ul><li>Your circumstances may be different than others in the group </li></ul></ul><ul><li>Data collection, reporting and classification </li></ul>(c) David L. Olson - 2011
    39. 39. Industry benchmarking <ul><li>Theatre Facts www.tcg.org </li></ul><ul><ul><li>Non-profit professional theatres that are members of TCG </li></ul></ul><ul><ul><li>Select “Tools and Research” </li></ul></ul><ul><li>Compare their %’s to yours </li></ul><ul><ul><li>By budget group size </li></ul></ul>(c) David L. Olson - 2011
    40. 40. Theatre Facts (2009) <ul><li>Part 1: Trend Theatres </li></ul><ul><ul><li>The same theatres (112) that have reported over the last 5 years </li></ul></ul><ul><li>Part 2: Participating Theatres </li></ul><ul><ul><li>Theatres that responded to this year’s survey </li></ul></ul>(c) David L. Olson - 2011
    41. 41. Theatre Facts “group” budgets <ul><li>Group 1: $10 million + </li></ul><ul><li>Group 2: $5,000,000 - $9,999,999 </li></ul><ul><li>Group 3: $3,000,000 - $4,999,999 </li></ul><ul><li>Group 4: $1,000,000 - $2,999,999 </li></ul><ul><li>Group 5: $ 500,000 - $ 999,999 </li></ul><ul><li>Group 6: $ 499,999 – $ 999,999 </li></ul>(c) David L. Olson - 2011
    42. 42. Let’s take a quick look <ul><li>TheatreFacts_2009.pdf </li></ul><ul><li>Average earned Inc: p. 24, Table 15 (both $ and %) </li></ul><ul><li>Key efficiency ratios: p. 26, Table 16 </li></ul><ul><li>Average expenses: p. 27, Table 17, 18 </li></ul><ul><li>Average $ gift, by source: p. 29, Table 20 </li></ul><ul><li>Average contrib’d inc.: p. 30, Table 22 </li></ul><ul><li>Key operating benchmarks: p. 33, Table 25 </li></ul>(c) David L. Olson - 2011
    43. 43. Dave, let’s see this stuff in action! <ul><li>Now, let’s really put the FUN in account FUNi ng! </li></ul><ul><li>All-Pippin Dinner Theatre Audit.pdf </li></ul><ul><li>ArkansasSymphAuditFS.pdf </li></ul><ul><li>(Work from the “unrestricted fund” only) </li></ul>(c) David L. Olson - 2011
    44. 44. Contact me <ul><li>E-mail: [email_address] </li></ul><ul><li>Twitter: ArtsMgmtGuy </li></ul><ul><li>LinkedIn: Dave Olson (UNCSA) </li></ul><ul><li>Cell: 612-799-1490 </li></ul>(c) David L. Olson - 2011

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