Nonprofit Financial Statements: 4 Essential Reports to Know

This allows readers to easily understand the composition of the organization’s net assets and the overall accounting services for nonprofit organizations financial position. The following three nonprofits have included financial statements in different ways. Liabilities include things like salaries, debt, and grants to other organizations. When listing your nonprofit’s liabilities, you must list them by when they must be paid and separated by current and long-term liabilities. Financial statements also help you determine the future of your organization.

• So, if a donor pledges to make a $5 contribution each month for 1 year, you’d record $60 in income the day the pledge is made (regardless of when it is actually collected).
• Current assets are those that can be converted into cash within one year, such as cash, accounts receivable, and inventory.
• 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.
• It is important for nonprofit organizations to carefully monitor and manage their liabilities to ensure long-term sustainability.
• Categorizing expenses allows stakeholders to assess how effectively the nonprofit directs funds toward its mission.
• 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.
• This section highlights the sources of revenue and support, as well as the expenses incurred by the organization.

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Like commercial businesses, nonprofit organizations have overhead and operating expenses to contend with. Yet, they don’t typically focus on selling goods or services as a means to cover those expenses. Instead, they rely on the generosity of donors to help them make ends meet.

Why Nonprofit Financial Statements Matter

Mastering nonprofit financial statements is not just about keeping accurate financial records. Maintaining trust, making informed decisions, ensuring compliance, and ultimately safeguarding the future of the organization are essential. We will guide you through the key parts of nonprofit financial statements. You will also get practical tips to make your reports clear, trustworthy, and easy to read. In addition to https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ these statements, nonprofit financial reporting may also include notes to the financial statements. These notes provide additional information and explanations about specific items in the financial statements, significant accounting policies, and other disclosures.

• Nonprofit financial statements also have specific reporting requirements and use fund accounting.
• In addition to these statements, nonprofit financial reporting may also include notes to the financial statements.
• A detailed insight enables the nonprofit to assess its financial sustainability, identify trends, allocate resources effectively, and plan for future funding needs and projects.
• You can run them with just a few clicks, and easily add columns for budget to actual, balances, and activity year-over-year.
• The statement of cash flow shows how cash moves in and out of a nonprofit.
• 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.

Audit and Assurance Services

The four services to consider are preparation, compilation, review, and audit. The order of liabilities on your statement of financial position depends on their due date, with short-term obligations listed before long-term ones. A nonprofit statement of financial position is one of several documents nonprofits can use to demonstrate where donors’ money is being spent. It’s essential for nonprofits looking to grow—but they can be complicated. Keep in mind that even with a template, your nonprofit will need to customize its financial statements to match your unique data.

Statement of Financial Position (Balance Sheet)

• Each of the four core reports that nonprofits compile annually summarizes your financial data in a different way, providing unique insights into your organization’s current situation.
• Each financial statement offers a unique view into how a nonprofit operates today and what opportunities exist for the future.
• This decision makes sense, since donors to a scholarship fund are likely concerned solely with financial details from this organization.
• Above all, keeping good accounting records ensures accurate nonprofit audits or financial statements.
• Here you’ll see cash from your funding sources and how you’re handling it.

One-third of all states in the US need nonprofits to perform regular audits if they solicit state residents. Nonprofits may be surprised when they realize that the request for a nonprofit audit may come from many sources. In addition to the IRS, there are a number of different organizations and the state government too can expect audit results from your nonprofit. If you’re an educational nonprofit or one that offers scholarships, you may want to check out the below financial report from Heliconia Scholarship Foundation.