A Crash Course In Balance Sheet Basics

Teaching employees about credit union finances is turning clock-punchers into business-thinkers at this Montana cooperative.


To the uninitiated, a credit union’s financial statements are often a baffling jumble of numbers, about as comprehensible as the Runic alphabet. But what if all credit union employees, from tellers to senior managers, could make sense of those reports to monitor the organization’s performance? Could such a financially literate staff improve the credit union’s bottom line by having a new appreciation for its costs and revenue? That’s what Missoula Federal Credit Union ($395.8M, Missoula, MT) hopes to discover.

Six months ago, Missoula began implementing a strategic initiative to teach its entire staff balance sheet basics such as what counts as an asset or a liability, how income is calculated, and why capitalization matters.

“We wanted to take this big bunch of intimidating numbers and demystify them,” says John De Groot, Missoula’s vice president of finance. “The training translates our everyday business into numbers so the staff can understand how their jobs have an impact on the credit union’s performance.

Strong Motivators

Total revenue at Missoula is down 11.49% over the past year, and net income plummeted more than 60%. A slowing regional economy and the credit union’s divestiture of mortgage loans to reduce interest rate risk account for some, but not all, of that decline. At the same time, Missoula has been shifting more of its lending activity to new cars, credit cards, and business loans, where growth has been healthy but not fast enough to offset the loss in revenue from mortgage interest.

To improve performance, every employee must do their part to cut costs and generate income. For added motivation, the credit union is offering employees a monetary reward proportionate to salary and scaled to the credit union’s key performance indicators (KPIs) at the end of the year. The KPIs measure areas in which the credit union would like to improve. Missoula weighs each KPI differently; more important goals have more heavily weighted KPIs. Missoula is working with a consultant to determine the algorithms for ranking the KPIs and calculating monetary rewards accordingly.

“Employees might get nothing because we don’t perform well, or they might get three weeks worth of wages,” says Missoula’s director of training Robert Farmer.

Meanwhile, employees can use their new skills every month when the credit union releases new financial statements.

“Some branch managers review the monthly statements with their staff and discuss how performance might be improved,” Farmer says. “Or if it was a good month, what everyone did right.”

De Groot — who teaches the two, hour-long balance sheet basics training sessions — encourages staff to ask questions. He then posts the questions and answers on an internal discussion board.

A Shift In Mindset

Already, the crash course in financial statements is raising awareness.

“There’s been a shift in mindset that is more of a business owner’s mentality and not someone who just wants to punch in at nine and leave at five,” De Groot says.

Employees are more conscious of how their own small decisions — whether to refund an overdraft fee or who should pay for the registered mail when notifying a delinquent borrower of the account’s status — collectively affect the credit union’s financial reports. Missoula believes in serving its members, but it also recognizes some of them take advantage of that service at the credit union’s expense.

“There needs to be a consequence if a member is repeatedly overdrawing the account,” Farmer says.

The same holds true of members who hold only a savings account with the credit union but regularly cash checks. As a result of the training, tellers now crack down on check-cashing scofflaws and charge them a fee.

Is there a danger that members will perceive this crackdown as penny-pinching? Perhaps, but Missoula also has a responsibility to maintain its fiscal health, something that benefits all members, not just those who try to game the system.

The change in mindset has had other effects. Employees who think of their own personal checking accounts as an asset now recognize that on Missoula’s balance sheet, the accounts register as a liability. Similarly, studying the credit union’s finances has driven home the importance of loan interest and fees, which account for nearly half of the credit union’s total annual income. As a result, employees are more conscious about referring friends and acquaintances to Missoula for loans.




July 1, 2013


  • Chris, in light of the financial training you set up I thought you'd find this to be an interesting article.
    Manuel Cervantes