Nonprofit Financial Statements: Complete Guide with Examples

We are now ready to present examples of the statement of financial position and the statement of activities. To do that, we’ll follow the activities of a nonprofit organization called Home4U, a daytime shelter for adults. Since a nonprofit’s primary purpose is to provide programs that meet certain societal needs, it issues a statement of activities (instead of the income statement that is issued by a for-profit business). Utilizing these resources can greatly enhance a stakeholder’s ability to understand and effectively manage nonprofit financial matters. Asset management analysis examines how effectively a nonprofit utilizes and manages its assets to support its activities and achieve its mission.

Understanding the Liabilities Section

• By following these best practices, you can ensure the financial stability and success of your nonprofit organization.
• However, there are a number of other key assets that a Statement of Financial Position summarizes for the organization.
• With the right software in place, you’ll be able to easily pull the financial information you need and customize reports to more effectively highlight the metrics and insights that your organization depends on.
• Under the accrual basis of accounting, revenues are recorded at the time of delivering the service or the merchandise, even if cash is not received at the time of delivery.

With purpose-built features for nonprofits, you’ll save time, reduce errors, and gain deeper insights into your financial health. The Statement of Financial Position provides a snapshot of your nonprofit’s financial status at a specific moment in time. In other words, it shows what you own, what you owe, and what your organization is worth financially. These documents aren’t just boring spreadsheets; they’re the storytellers of your nonprofit’s journey, showing donors and stakeholders that you’re managing their hard-earned dollars wisely.

Statement of Financial Position: Reading a Nonprofit Balance Sheet

Assets are typically listed in order of liquidity (how easily they can be converted to cash). The cash basis method records transactions when money changes hands, while the accrual method recognizes transactions when they are confirmed or incurred. Plus, at the bottom of the page, Feeding America adds a link to view its audited financials for anyone interested in delving deeper into its financial situation and activities. Typically, the finance team prepares these statements, while executive leadership and the board review them. Return to the Internal Reports Introduction page using the link below for greater detail on how to read various reports as well as recommended formatting. Take our 2-minute survey to find out if outsourced accounting and bookkeeping is a good fit for your organization.

Illustration of the Statement of Financial Position and the Statement of Activities

• This compares the amount of funds you allocate to your programs and services with the amount consumed by administrative or fundraising expenses.
• To ensure consistency and comparability, it’s important to use a standardized format for your statement of financial position.
• But wait, why is it often referred to as a ‘balance sheet’ and how does it differ from a for-profit one?
• For example, you may find that while your net assets are lower than you’d like them to be, they’ve been steadily increasing over time, indicating growth and sustainability.
• It summarizes your revenues and expenses for a specific period and allows both your organization and stakeholders to understand how you’re managing your resources.
• Should this seem intricate, you might consider to outsource your accounting to ensure precision.
• When it’s all put together, a nonprofit statement of financial position is a pretty straightforward document.

A nonprofit’s statement of financial position, or balance sheet, provides a snapshot of an organization’s assets, liabilities, and net assets. Utilizing a template for your nonprofit’s statement of financial position can streamline the process, although it’s crucial to ensure accuracy to avoid misrepresenting your organization’s financial health. A template will provide a structured format and guide you through what needs to be included, but remember that filling it out incorrectly can imply improper financial management.

Links to Templates and Software That Can Assist in Preparing the Statement

• Here is a roundup of supporting templates that help businesses and individuals track expenses, project revenue, analyze profitability, and manage debt.
• These articles and related content is the property of The Sage Group plc or its contractors or its licensors (“Sage”).
• There are many different types of nonprofits, including governmental nonprofits, which we will not address.
• A dedicated CPA specializing in nonprofit organizations is the cornerstone of financial health and transparency.
• Use the information and tips above to get started, and don’t hesitate to reach out to an accountant if you have any questions or need help along the way.
• The data in your balance sheet can help you figure out the total amount of cash and other liquid assets you have available so you can determine whether your nonprofit has enough financial flexibility to grow.

It provides insights into how the organization raises capital and manages its debt and equity. In the Operating Activities section, the statement shows the cash flow from the organization’s ongoing, regular business activities. This includes The Key Benefits of Accounting Services for Nonprofit Organizations cash received from customers, cash paid to suppliers and employees, and other operating cash flows. It is an important indicator of the organization’s ability to generate cash from its core operations. In addition, this section may include a table that presents a breakdown of revenue and expenses, providing a clear overview of the organization’s financial activities.