For not-for-profits, getting a handle on financial statements is huge. It keeps things honest, checks the legal boxes, and helps figure out what to do next. These papers lay out how the non-profit is doing with money and if it’s on track. Here’s a rundown of the big ones they need to know.
Statement of Financial Position
People sometimes call this the balance sheet. It’s a quick peek at what the organization’s got, what it owes, and what’s left over on a certain day.
- Assets: All the stuff owned—cash, investments, maybe a building or some gear. They’re lined up by how fast they can turn into cash (yeah, that’s liquidity).
- Liabilities: Bills or debts owed—like loans or stuff still unpaid. They’re grouped by when they’re due, short-term or way later.
- Net Assets: What’s left after you take out the debts from the assets. Donors call the shots here:
- Without Donor Restrictions: Money they can spend however.
- With Donor Restrictions: Cash stuck to whatever the donor wants, maybe for a while or forever.
It’s a way to see if the organization is solid and can pay what’s coming, now or down the line.
Statement of Activities
This one’s like an income statement, but for not-for-profits. It shows money in and out over some time, letting you see how net assets shake out.
- Revenues: Cash coming from donations, grants, fees, or programs. Depends on if donors tied it down or not.
- Expenses: What they spend to keep things rolling—program stuff, office costs, or chasing more funds.
Stack revenues against expenses, and you’ll know if they’re doing okay and using money smartly.
Statement of Cash Flows
Here’s where you watch the cash move. It’s split three ways:
- Operating Activities: Cash from the main gig—like donations landing or paying suppliers.
- Investing Activities: Money from grabbing or dumping big stuff, like gear or stocks.
- Financing Activities: Cash tied to loans—borrowing or settling up—or other money tricks.
Keeping tabs on this keeps the lights on and plans ahead.
Statement of Functional Expenses
This one’s just for not-for-profits. It chops expenses up two ways: what they are (salaries, rent, supplies) and what they’re for (programs, running things, fundraising). Shows real clearly where the money’s going—mission or management.
Why It’s a Big Deal
For not-for-profits, doing financial reports right isn’t just hoops to jump through—it’s how they keep trust. Good, open numbers let donors, grant people, and folks see what’s up with the cash and if it’s helping. Plus, it’s how they plan—budgets, growing stuff, splitting up what they’ve got. Peek at it often, and they’ll catch trends, dodge messes, or jump on good shots.
Rough Spots and Fixes
They hit hiccups—tracking donor-locked funds, splitting costs right, or keeping up with new rules. Here’s what works:
- Grab decent tools—software made for this can keep it straight.
- Have sharp people—those who know it or can learn fast.
- Jot everything down—deals, donor notes, grant rules, all of it.
- Double-check—audits inside or out catch slip-ups and fix holes.
Keeping It Real and Rolling
Figuring out these statements is everything for not-for-profits that wanna stay straight, do their thing well, and keep folks cheering. Stick to good reporting and solid habits, and they’ll keep kicking for the long haul.
For specialized assistance in managing not-for-profit financials, consider partnering with Grady CPA for not-for-profit accounting services–who provide tailored accounting solutions to the not-for-profit sector.