The World Wildlife Fund (WWF) features graphs alongside its statement of activities to present its annual report readers with a more visual perspective of its revenue and expenses. With just a glance, it’s easy to see that 85% of total expenses were program-related and that the majority (29%) of operating revenue came from individual contributors. The details in your statement of financial position will come in handy when it’s time to file your Form 990. Additionally, you can use this report to learn more about your nonprofit’s liquidity. For instance, by dividing your total current assets by your total liabilities, you can calculate your current liquidity ratio.

A Practical Guide to Nonprofit Financial Statements

The Statement of Cash flows is a relatively simple report that shows if your cash has increased or decreased across 3 segments of your business. The Statement of Financial Position is a snapshot of what your organization owns and what it owes to others at a specific point in time. Did you know that websites like Charity Navigator and GuideStar use this report to rate your organization?

What Does the Statement of Financial Position Tell You?

Like a for-profit company’s income statement, a statement of activities shows all of the financial activity that has taken place in your organization and the financial result of your work. Below, you’ll learn about the value of each, what information to report, and how they work together to keep your nonprofit financially sound. Here’s a comprehensive 10-step guide to preparing accurate and transparent nonprofit financial statements. Donors, grant providers, and fundraising events primarily fund nonprofit organizations. Furthermore, they have a responsibility to demonstrate that they manage funds effectively and ethically. In this blog post, we delve into the best practices for preparing nonprofit financial statements.

• Improve your financial planning with our comprehensive nonprofit budget template and 9-step guide.
• Every governmental organization in the U.S. and Canada releases a Comprehensive Annual Financial Report (CAFR) annually.
• Temporarily restricted funds are earmarked for specific projects or time frames, necessitating careful tracking and reporting to ensure they’re used as intended.
• This ratio measures your short-term financial health and ability to meet obligations.
• The IRS 990 doesn’t really qualify, since it’s done once per year and first-and-foremost as a tax compliance document.
• Major contributors to a nonprofit organization typically include donors, volunteers, influential staff and board members.
• They allow for informed decisions on how to allocate resources, as well as help with audits and compliance.

Understanding the Liabilities Section

• The assets and liabilities listed on a nonprofit’s Statement of Financial Position are listed as of a certain date, typically the end of the prior month or year-end.
• A nonprofit’s statement of financial position can tell you how well the organization is performing financially at a given moment in time.
• This describes your ability to pay off short-term liabilities (debts due within a year) with short-term assets (such as cash, receivables, and inventory).
• Carve out time to review financials with your accountant, bookkeeper, or outsourced team—even if it’s just 30 minutes.

Assets represent what the organization owns, such as cash, investments, and property. Liabilities represent what the organization owes, such as loans and accounts payable. Net assets, also known as equity or fund balance, represent the organization’s total assets minus its liabilities. accounting services for nonprofit organizations Nonprofits are independently audited to inspire and maintain the trust of their donors, demonstrating financial transparency and accountability.

The 4 major nonprofit financial statements

These standards, often governed by bodies such as the Financial Accounting Standards Board (FASB), ensure that the financial statements accurately reflect the organization’s activities. Key components typically include the statement of financial position, statement of activities, and statement of cash flows, each tailored to highlight the unique aspects of not-for-profit operations. Moreover, the focus is on understanding financial statements and how to prepare them.

Want to see a live breakdown of real-life nonprofit financial statements

One of the statements (the functional expenses statement) is entirely unique to nonprofits. Not-for-profit organizations must file annual information returns with regulatory bodies such as the IRS in the United States. These filings provide detailed information about the organization’s financial activities, governance, and compliance with tax-exempt status requirements, ensuring ongoing eligibility for tax benefits. Charitable organizations must adhere to specific compliance and regulatory requirements to maintain their not-for-profit status. These requirements ensure transparency and accountability in financial reporting, which is critical for maintaining public trust and securing funding from donors and grants.