Women in Biohealth (WiB) X TEMPO PRESENT through the Women on Boards Series- Understanding Board Financials: 5 Tools to discovering the stories that drive the numbers

At the latest Women in Biohealth (WiB) X TEMPO event, board members and aspiring leaders gathered to learn how to navigate financials with confidence. Led by Susan Thomson, CEO of ActionCOACH, the session, Understanding Board Financials: 5 Tools to Discovering the Stories That Drive the Numbers, provided essential strategies for interpreting financial statements, asking the right questions, and making informed decisions. Whether you’re currently serving on a board or aiming to, these insights will help you add value, make a difference, and contribute meaningfully to your organization’s success.

Overview

1. Perspective

2. Examples with context

3. Tools you can use along the way

1. PERSPECTIVE

• Business vs. CPA Focus – these are different!

-CPA: Expect at least one CPA on a board. The CPA focuses on how those numbers impact your taxes.

-Business perspective: evaluate business strategies for financial success

• Board member role: today looking at AME  

• Add value, Make a difference, Enrich the team

• These are not “gotcha” roles.

• Example 1, What not to do. In a previous CEO role, as Susan turned around a failing company – but she hated the board meetings because the board focused so strongly on problems and negatives. This kind of dynamic is “dangerous” to the CEO and is not the best use of all the brainpower in the board room.

• Example 2, Be curious. Quote: “Don’t be intimidated by what you don’t know,” Sara Blakely (founder of Spanx). As a board member, Susan was presented with an overwhelming number of acronyms in meetings that were not explained. She would pause the meeting to ask for clarification – and everyone benefited. Others approached her later, grateful that someone spoke up, because they didn’t know either.  

2. FIVE TOOLS FOR DISCOVERY

1. Financials - What to ask for

2. P&L by Product/Service Type (Profit/Loss statement)

3. Understanding Break Even

4. 80/20

5. 5 Ways to find revenue and profit

Your job as a board member is not to create the business plan, but to assess if the business plan is realistic, and if it will provide a path to get where we need to go.  

Financials – What to ask for:

1. Year over Year comparisons: Ask for prior 1 year AT A MINIMUM to compare with current reports

2. With percentages  

3. Look for trends  

4. Compare to what is typical in the industry

5. Dig deeply into COGS (cost of goods)

• If you see a P/L statement that’s in the black, that’s good – but what you need to know is how are they doing versus previous years? Is it normal for the industry? Are cost of goods going up or down – and what % of sales are they? If COGS are going up, what is causing that? Note, COGS are not the same as expenses. Look at whether COGS can be managed in addition to asking about increases or decreases in expenses, because every % point of COGS affects the net profit %. You can ask your CFO ahead of the board meeting – help them prepare by emailing questions in advance. Don’t wait till the meeting or afterwards.  

• Essential takeaway: understand what is happening behind the numbers on the P/L.

• Example 1: Company A had good growth trend until suddenly one year numbers tanked. What happened? A competitor had opened up in their area.  

• Example 2: Small business B was struggling with irregular and high labor expenses. Reason? New employee training and retention was inconsistent, and expensive. Discovered that the % of people who would complete their first 90 days was low, but if they made it that far they stayed a long time. The solution correctly addressed the root cause, and improvements were made to training/onboarding plans.  

• Example 3: Manufacturing expenses were high, and when dug into, found employees were not always clocking out on time. A few minutes per person every day added up and was affecting the bottom line.  

• These examples show how much variety there can be in factors affecting the financial health of the organization, and why it’s important to understand more than the numbers.  

Audience question: What sources to use for Industry stats?  

Answer: You can pay for marketing reports. You can also ask ChatGPT – and ask for its sources to confirm reliability.  

Profit by Product or Service Type:

• This is a standardized report in most accounting systems. High profit items can mask money losers. So, you need to know what is strong and what is weak in order to evaluate business strategy.  

• Example: 3 products with a decent gross profit line. But when evaluating how the gross overhead applies across these products, the table shows something very different about what is making $ and what is costing $ to produce.  

Understanding Break Even:

• Break even is the amount of sales you need to cover all expenses. Use this for decisions about:  

• adding employees

• adding equipment

• capital purchases

• new product lines

• sales forecasting

80/20:

• 80/20 break down is literally a table ranking products by % revenue. E.g.

• Example: Company was running $100K behind  per day – a dire condition. The company wasn’t making 80% of the profit from 20% of the products; they were at 90/10. Once identified, company was able to jettison the products and efforts that weren’t profitable, invest into the one(s) that were, and was in the black within a year.  

Reminder: a board member’s job is to identify if the plan proposed for the business is realistic. Not to find ways to increase sales.  

5-Point Proven Blueprint to boost sales, increase revenue and profit:

• Calculation:

# leads x conversion rate = customers X Transactions X Avg $ sales = Revenue X profit margins = profit.  

• Look at the numbers in this workflow to understand which point of action needs attention.  

• Make sure you’re targeting the right people and that you’re getting outcomes - is it actually producing / expanding the next step?  

• Help the CEO see the possibilities in each step to do more.  

• Small increases at any step can have big impact – example of 10% improvement to every step (e.g. 20% à 22%) leads to 48% overall increase to profit.  

Audience question: what span of time do you run this for?  

Answer: depends on the industry, but can be year over year (YTD minimum, but some projects in some businesses can take years)

SUMMARY

As a board member: Ask the right questions to be a help and a resource to your CEO. The stories can be rich and revealing, and make the difference in moving things in the right direction.  

ADDITIONAL RESOURCES

Business MasterClass – Learn the building blocks for a healthy business – from company vision to marketing and selling, to systems, team, finance and customer service.

Management MasterClass -Unlock your management potential. Each week presents a unique facet of management development, which builds a solid foundation for your management skills growth. In this “install as you go” program you will not only learn, but also put your new management strategies into place each week.

Leadership MasterClass –Leadership is all about enrolling and inspiring your team and determining overall strategy.  You’ll get the “what,” “how to,” and opportunity to practice in a safe setting each week as you hone your leadership with your coach.

Sales MasterClass - Dive into sales mastery to equip you and your team with the skills and mindset necessary for success. Each week, you’ll explore a unique step of the sales process, making this an interactive process to create or strengthen your existing sales skills. This applies to selling your ideas internally as well as externally.

Business Financials MasterClass- 

If you've ever found yourself unsure of what your financials are telling you or how to use your financials for making decisions, we guarantee you will love this deep dive into your financials.  You'll get clear on Profit & Loss, Balance Sheet, Cash Flow Forecasting, Key Ratios where to look for opportunities. 

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