Every Board member has a financial oversight role. Even if you don’t have financial expertise, you are still expected to have a level of financial literacy. This means that you need to have an understanding of the fundamental concepts, conventions and principles underlying financial statements.
Top 5 tips to help you become financially literate for corporate boards:
- Develop a plan and begin the work. Begin by reviewing the annual filings of TSX listed companies that you are interested in.
- Look for a mentor or someone who has financial expertise. Ask someone you know that has financial expertise if you can spend time with them over the next year to help you understand financials.
- Do your financial due diligence before joining corporate board. Review the annual audited financial statements, quarterly financials, Management, Discussion & Analysis (MD&A) and forecasts/budgets to understand the company’s financial position.
Ask yourself with the following questions:
~Is the company solvent?
~Are they complying with their loan covenants?
~What is the company’s shareholdings structure, are there Related Party Transactions, what are the outstanding commitments?
~What is the status of their tax and other filing requirements?
~Did they receive a clean audit opinion? If not, why and is there a “going concern” note disclosure?
- Understand the basic financial concepts/principles and the various financial statements. CPA Canada has great document you can refer to: https://www.cpacanada.ca/en/business-and-accounting-resources/financial-and-non-financial-reporting/international-financial-reporting-standards-ifrs/publications/reading-financial-statements-what-do-i-need-to-know-faq
- Understand the role of the board, of management and of the auditors in the financial reporting of a Corporation.
Getting financially literate takes time, focus and commitment.
Interested in Becoming Financially Literate? Registration is still open for Women Get On Board’s ‘Understanding Financials for Corporate Boards’ Workshop: http://bit.ly/UFWorkshop2Apr20
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