Elegant Financial Systems: Principles and Practice

• March 11, 2019
• Curtis Klotz

One of the highest compliments I’ve ever received as a nonprofit CFO was when our board chair told me that my budget presentation was the most elegant one she’d ever seen. I literally blushed. What is most humbling about the compliment is that the budget presentation she was calling out was not particularly revolutionary or imaginative. At least in my mind. It was, however,

• As simple as it could be, while still being complete;
• As informative as it could be, without being too dense; and
• As sophisticated as it could be, without being overly complicated.

It turns out that elegance in financial systems is about balance and appropriate design. The goal is to structure our financial systems and reporting to be wholly in the service of our mission work and organizational success. An elegant financial system provides our program staff, organizational management, and board leadership with the most relevant, most strategic set of financial data possible.

With these ideals in mind, CLA is launching our new Innovation in Nonprofit Finance Blog with a series of pieces on both the principles and practice of elegant design in nonprofit accounting systems. Once a month, I will share my thoughts on some of the principles that make up an elegant financial system. We’ll follow up my article on the elegance principles with companion pieces from my colleagues, Kelly Kienholz, CLA’s national director of outsourced accounting for nonprofits, and Kathy Jastrzebski, author of the popular CLA Sage Intacct Blog, who shares tips and step-by-step guidance on the best use of Sage Intacct software.

Our goal will be to guide you through the process of designing a system that produces the financial information you need to manage your organization well and support effective financial strategies. At the same time, we’ll help you avoid muddying your decision-making with too much detail or cumbersome presentation formats. Kelly, Kathy, and I will go back and forth between principle and practice to help you rethink and redesign your own accounting and finance systems to match your strategic and operational needs. 

You can begin to prepare yourself for the elegant design process by considering these two questions, which come out of years of trial and error, redesign, and refinement. To warrant inclusion in an elegant financial system, all the components of your system and all of its data points should hold up against one or both of these simple tests:

• Is this particular component of the system (cost center, department, allocation, fund, grant code, chart of accounts grouping, or line item) absolutely necessary for us to manage our organization and make important strategic decisions?
• Is this particular component of the system (cost center, department, allocation, fund, grant code, chart of accounts grouping, or line item) absolutely required by outside users of our financial and organizational data — donors, foundations, government agencies, regulatory agencies, nonprofit watchdogs, or community members?

For our first topic in this new series, we’ll apply the elegance principles to programs, cost centers, funds, and net asset classifications. Later topics will include elegant charts of accounts, elegant allocations, and elegant dashboards.

To join us in the adventure, use this link to subscribe to the CLA Innovation in Nonprofit Finance Blog or be sure to favorite our site and check back often. There will be other topics and other series interspersed along the way, authored by myself and others among CLA’s experienced and enthusiastic nonprofit group.

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