The three main types of financial statements are the income statement, balance sheet, https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ and cash flow statement. Hopefully, you now have a better understanding of each type of statement and how to prepare them. The Statement of Activities, also known as the income statement, shows the revenues, expenses, and changes in net assets of a nonprofit organization over a specific period.
Nonprofit statement of activities template
Categorizing expenses allows stakeholders to assess how effectively the nonprofit directs funds toward its mission. A high proportion of expenses dedicated to program services typically indicates that the organization is using its resources effectively for mission-related activities, with minimal overhead. Consistent positive cash flow from operating activities is a good indicator of financial health.
Written Statement Templates in PDF DOC
When analyzing nonprofit financial statements, stakeholders can utilize common financial ratios and indicators to assess liquidity, solvency, efficiency, revenue and expense trends, and financial sustainability. By comparing these ratios to benchmarks or past performance and considering the organization’s mission and external factors, stakeholders evaluate the nonprofit’s financial performance in a broader context. The balance sheet is one of the fundamental financial statements that provides a snapshot of an organization’s financial position at a specific point in time. It outlines the organization’s assets, liabilities, and net assets, which together display the overall financial health and stability of the nonprofit. Interpreting notes to financial statements for nonprofits involves reviewing the information provided and understanding its implications for the organization’s financial health and performance.
Purpose Statement Templates in PDF DOC
Having the right fund accounting software with sub-fund capabilities makes creating these reports simple and easy. Check out the Blackbaud Financial Edge NXT on-demand product tour to learn more. This report can help you explain to your board why you have less cash even after a great fundraising month (maybe you invested in some much-needed equipment).
Revenues
- You can show donors how you’ve used past donations, what you’ve achieved, and how you plan to use new funds.
- They can come from individuals, corporations, foundations, or government agencies.
- They serve as a valuable tool for stakeholders, such as donors, board members, and regulators, to assess the financial health and transparency of the nonprofit organization.
- Liquidity refers to how quickly an asset can be converted into cash without significant loss in value.
- Meanwhile, unrestricted revenue can be allocated toward projects, operations, and other expenses as chosen by the nonprofit itself.
- Maintaining positive cash flow is essential for a nonprofit’s ability to meet its financial obligations and invest in future projects, supporting long-term stability and growth.
To comply with Generally Accepted Accounting Principles (GAAP), you must separate your revenue into at least two categories – restricted revenue and unrestricted revenue. Ideally, nonprofits should prepare internal financial statements monthly or quarterly for management purposes. However, externally, annual financial statements are standard, often accompanying required annual filings. Once finalized, share your financial statements with key stakeholders, like your board of directors, donors, grant-making entities, and the general public, as needed. While not all nonprofits require an external audit, larger ones or those receiving certain types of government funding might.
- The income and expenditure can be subdivided into various categories depending on the activities of the non profit organization.
- Plus, this publicly available information can provide current and prospective donors with the context they need to decide whether they’d like to support your nonprofit based on how it employs its funds.
- Many nonprofits find that the word “activities” better reflects their focus on mission-driven work and the fact that they bring in revenue from a variety of sources—not just earned income.
- Most importantly, be sure your nonprofit financial software provides the accounting tools for nonprofit organizations’ unique requirements.
- It also includes cash flows from activities such as grants, donations, and program-related revenue.
- However, Nonprofits must still follow special rules to keep these perks, like aligning their activities with their charitable purpose.
Reasons to Consider a Nonprofit Specific CMS
Nonprofit organizations play a vital role in society by addressing various social, environmental, and humanitarian issues. These organizations rely on their funding sources to carry out their missions effectively. To ensure transparency and accountability, nonprofits are required to prepare and publish financial statements that provide a snapshot of their financial health. Firstly, it allows the organization’s management to track and analyze its financial performance. By comparing revenues and expenses, nonprofits can assess whether they are operating within their budget and identify areas for improvement.
Key Components of Nonprofit Financial Statements
By analyzing the statement of cash flows, stakeholders can gain a deeper understanding of the nonprofit’s cash management practices and its ability to generate and utilize cash effectively. It helps assess the organization’s liquidity, cash flow generation, and ability to meet its financial obligations. The income statement, also known as the statement of activities, provides a summary of an organization’s revenues, expenses, gains, and losses over a specific period.