The content on this website is provided “as is;” no representations are made that the content is error-free. Aplos partners with Stripe Payments Company for money transmission services and account services with funds held at Fifth Third Bank N.A., Member FDIC. GAAP compliance ensures that reports meet the legal requirements and align with industry standards.
What are Nonprofit Financial Statements?
If you’re getting ready to file—or simply want to improve your understanding—these four essential financial statements within Form 990 are where you should focus. Similar to LLS, Heifer International has an entire page on its website devoted to sharing its financial information with stakeholders, including a graph that maps out its expenses over the fiscal year. Simply, it reports your organization’s revenue and expenses during a specific period and the difference between them. Non-profit accounting software can be a valuable tool for managing and generating important financial statements for nonprofits. Many nonprofits recognize that making the balance sheet available helps keep them transparent with donors, grant makers, and stakeholders, as well as facilitating compliance with financial regulations. Each method affects how revenue and expenses appear in your financial statements, so it’s important to choose the method that best reflects your operations.
Statement of Cash Flows
This statement helps stakeholders understand the financial health and stability of the NPO by showing what it owns and owes. The Statement of Activities details the NPO’s revenue and expenses over a reporting period. An income statement (AKA, the statement of activities) summarizes your organization’s revenue and expenses over a specific time period—quarterly, monthly, yearly, etc. It helps you understand your financial performance and whether your organization is operating out of a surplus or deficit.
Support risk management
Nonprofit financial statements are documents that provide a summary of the financial activities and position of a nonprofit organization. They include information on the organization’s assets, liabilities, revenues, expenses, and net assets. The section of additional disclosures in nonprofit financial statements provides important information that goes beyond the basic financial data. It includes details about significant accounting policies, potential risks and uncertainties, and other relevant information that may impact the organization’s financial position and operations. The Statement of Cash Flows is a financial https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ statement that provides information about the cash inflows and outflows of a nonprofit organization. It shows how cash is generated and used by the organization during a specific period of time.
- For donors, board members, and other supporters, financial notes offer a comprehensive view of the organization’s stability, highlighting any special conditions or financial commitments that could influence its future.
- Reports like Form 990 are public, but internal versions may be shared only with key stakeholders, such as the board or donors.
- Nonprofit organizations are required to file financial statements with the IRS to follow compliance laws.
- For example, cash is already a liquid asset, so it’s listed first in the assets section.
- In addition, viewing financial statements as powerful tools ultimately contribute to the nonprofit’s success by showing strengths and weaknesses.
- Get our FREE guide to nonprofit financial reports, featuring illustrations, annotations, and insights to help you better understand your organization’s finances.
What Are Financial Statements in the Nonprofit World?
This statement also lists the resources, obligations, and ownership details of a company on a specific date, thus providing you with a snapshot of what the company looks like. Your statement of financial position is also a historical report, meaning it can only show what was present on the day of the report. The statement of financial position only records the company account information on the last day of the accounting period, which is typically 12 months. In this sense, investors and creditors can use these historical records to see the financial position of the nonprofit organization on specific dates. These four statements represent the primarily financial statements that nonprofit organizations prepare; however, some may include additional statements that provide even more insight into the organization’s finances. Familiarizing oneself with how these financial statements are developed will undoubtedly help users better understand a nonprofit organization’s financial position.
- It categorizes cash activities into operating, investing, and financing, helping stakeholders understand liquidity and cash management.
- Statement of Activities is part of your nonprofit’s accounting requirements and is often included in its annual report or audited financial report.
- Learn about nonprofit accounting processes, regulations, compliance, and best practices.
- Four key financial statements are essential for nonprofits to master for strong decision-making.
What are the Components of a Non-Profit Balance Sheet?
Contact us today to get expert advice and assistance on how to master your nonprofit financial statements! Financial ratios can help you track the efficiency and performance of your nonprofit. For example, the program efficiency ratio (program service expenses divided by total expenses) can help you understand if most of your spending is going towards your core mission. Similarly, the fundraising efficiency ratio (fundraising expenses divided by fundraising revenue) can tell you if your fundraising efforts are cost-effective. With a clear calendar, nonprofits can manage their workflow more effectively, reduce last-minute pressures, and ensure that financial statements are ready for timely review and submission. The operating reserve ratio measures how long a nonprofit can continue its operations without additional revenue.
