ROC-NH staff

Five numbers every co-op board member should know

By ROC-NH staff

Every board member of a resident-owned community should know these five numbers from the co-op's financial statements.

Every board member of a resident-owned community should know these five numbers from the co-op's financial statements.

Financial statements can seem like large, confusing documents with lots of numbers that don’t make much sense. But a cooperative’s monthly financial statements contain five numbers that every board member should know:

  1. How much money is owed the cooperative?
  2. How much money is in each of the cooperative’s bank accounts?
  3. How much is being spent on capital expenses?
  4. Is there a deficit or a surplus this month? This year to date?
  5. How much money does the cooperative owe to vendors?

Financial statement with calculatorThe answers to these questions are contained in three standard reports: the Balance Sheet, the Profit and Loss Variance or Income Statement (same report, different software), and the Cash Flow Statement.

The Balance Sheet contains much of the information that should be monitored and includes:

  • Accounts Receivable or Lot Rent Receivable (question #1, above). This is under Current Assets.
  • How much money is in the cooperative’s bank accounts (question #2). Also under Current Assets.
  • How much money the cooperative owes to vendors (question #5). This is referred to as Accounts Payable under Current Liabilities.
  • How much is being spent on capital expenses (question #3). The Capital Reserve account is a bank account under Current Assets. Transfers should be made into that account each month, so it should grow unless payments for capital expenses are made.

The Profit and Loss Statement or Income Statement contains your monthly and year-to-date financial activities.

Is there a surplus or deficit this month or year (question #4)? This statement shows your “bottom line.” It is literally the last line on the report called Net Income (loss), and shows whether you have a surplus or a deficit each month and year to date. If the bottom line number is in parentheses (  ), it reflects a deficit for that month or for the year.

The Cash Flow Statement shows any payments made for capital improvements and provides an overall view of how much cash went out and came in during a given time period.

The amount of information contained in financial reports can make them feel overwhelming. By keeping things simple and focusing on these five numbers, a board of directors can review reports easily and quickly, and can effectively monitor the community’s financial health.

Image courtesy of Dave Dugdale at LearningDslrVideo from his flickr photostream.

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