The Numbers That Tell Your Story: Red Flags, Ratios & the Story that Ties it All Together
Turning financial conversations from defensive to strategic and tying the whole series together.
This is the 5th and final edition in a series of newsletters highlighting my takeaways from the “Ask Me Anything: What Funders Look for in Financial Statements” session hosted by @Candid.
We’ve spent the last four weeks learning how to read your financials the way funders do. This last week is about what happens when the numbers aren’t perfect and how to talk about them anyway.
Spoiler: every organization has something. The ones that get funded despite it are the ones that name it first.
Common Red Flags and How to Defuse Them
🚩 Late or missing audit. Acknowledge the delay. Explain the cause. Describe your plan and timeline. Late audits signal capacity issues, but a clear explanation signals self-awareness.
🚩 Unresolved audit findings. Share the management letter proactively. Describe the corrective steps underway. Funders respect accountability far more than silence.
🚩 Recurring deficits. Distinguish between planned and unplanned. If you drew down reserves intentionally for a strategic investment, say so explicitly. Include your plan to rebuild.
🚩 Over-reliance on one funder. Name the concentration and describe your diversification strategy, even if it is in its early stage. Show momentum, not denial.
🚩 Low unrestricted cash. Provide context: your funding model, your receivables timeline, your reserve-building plan. If a capital campaign temporarily restricted cash, explain that and project when it lifts.
3 Ratios Worth Knowing
You don’t have to include these in grant applications but you should be able to speak to them fluently if a funder asks.
| 📊 Program expense ratio: What % of expenses goes to programs? A common benchmark is 65–75%, though it varies by model. If yours is lower, explain your infrastructure investment; don’t just apologize for overhead. |
| 📊 Months of cash on hand: How long could you operate on current unrestricted cash if all revenue stopped? 3–6 months is a healthy target. Below that, have your liquidity strategy ready. |
| 📊 Revenue concentration: What % of total revenue comes from your single largest source? If above 40%, be ready to discuss your plan. This isn’t automatically disqualifying, but silence on the topic is. |
The One Thing That Ties Every Together
Here’s what I really want you to take from this series:
The most fundable organizations aren’t always the ones with the strongest financials. They’re the ones that understand their own financial story, can tell it clearly, and make sure it aligns with their mission narrative at every touchpoint.
| ✨ Your budget, your financials, and your grant narrative should all be telling the same story. Every time. |
That requires Finance and Development to actually talk to each other. Consider ideally once a month. Not to reconcile spreadsheets, but to align on narrative. Ask: “What are we seeing in the numbers, and how does that fit the story we’re telling funders?”
Organizations that treat finance and development as separate departments leave money on the table. Organizations that treat them as partners build funder trust that lasts.
One Last Reframe
During the session, participants were taught, surplus budgeting isn’t optional, it’s strategic.
Your goal isn’t to break even. It’s to build reserves. Every surplus is a story of organizational resilience you get to tell a funder.
And being self-aware — especially as a newer or smaller organization — is a strength, not a liability. Name where you are. Show that leadership is engaged. Demonstrate that you have a plan.
That’s what good stewardship looks like.
| ✅ DO THIS TODAY– Set up a standing monthly meeting between your Finance Director and Development Director.o Agenda item #1: What does the financial picture look like this month?o Agenda item #2: Is there anything a funder might ask about and do we have a clear, honest answer?That’s it. Start there. |