Tom is a multi-disciplined leader with over a decade of experience in nonprofit operations, technology leadership in government, and over two decades of servant leadership. This part is all about showing your work to ensure everyone knows you’re doing things right. It’s a great way to show you’re on top of your finances and ready to adapt. Apart from insightful data, this section is all about telling real-life impact stories that happen thanks to your funding. For example, if a big donor gave a huge amount of money, make sure to mention it and explain what their donation helped achieve.

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They also help the organization to better understand its financial health and make smart decisions. Plus, financial statements ensure that the nonprofit follows the rules (like GAAP, which are the accounting standards). This is important for keeping the trust of donors, members, and the government. External users of the statement of activities may include Grantmakers, financial auditors, donors, members, or partnering organizations. The report can be used to show that the organization is correctly recording all of the money that is coming in and out of the entity and that each type of revenue is properly allocated.

How to Create a Non Profit Financial Statements 11+ Templates to Download

They can also receive tax-deductible donations, encouraging more people to give. If someone donates for a particular cause, like a scholarship or research, that money has to go exactly where it’s intended. Get $30 off your tax filing job today and access an affordable, licensed Tax Professional. With a more secure, easy-to-use platform and an average Pro experience of 12 years, there’s no beating Taxfyle.

Understanding Liabilities in Nonprofit Financial Statements

This allows you to compare your planned versus actual financial activities and evaluate how closely your organization was able to stick to its budget. So it’s very important that you learn to read the IRS 990 and understand what it says about the financial health and governance of your organization. And secondly, if you fail to file a 990 for 3 consecutive years, you’ll automatically lose your tax-exempt status.

• They can also receive tax-deductible donations, encouraging more people to give.
• It’s important to find the balance between reducing overhead to fund your mission and ensuring you dedicate enough funding to your operating activities to continue growing and expanding your organization.
• Program services, management expenses, budgeting, financial and administrative fees.
• Organizations will separate these expenses by programs, fundraising, and management.
• GAAP compliance ensures that reports meet the legal requirements and align with industry standards.
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Proper GAAP financial statements would include a statement of financial activity. A formal financial statement for a nonprofit organization shows the amount of expenditure for the current year and the prior year as well. Also called as statement of analysis cash flows, this means that the places in which the revenue of the company is going needs to be maintained properly.

• The Statement of Activities further breaks down your revenue and expenses according to any restrictions limiting how or when you may use them.
• In order to stay compliant with governing agencies, nonprofit leaders should frequently review the statement of activities to ensure that resources are being properly allocated.
• Effective financial management equips you to make the most of your nonprofit’s limited resources.
• They review, approve, and provide oversight on financial statements and budgets.
• The primary purpose of the statement of activities is to satisfy regulatory requirements, such as Generally Accepted Accounting Principles (GAAP) and Form 990 for the IRS.
• In this way, you can track all the money that your non-profit organization used over the year.

All information prepared on this site is for informational purposes only, and should not be relied on for legal, tax or accounting advice. You should consult your own legal, tax or accounting advisors before engaging in any transaction. The content on this website is provided “as is;” no representations are made that the content is error-free. Sage Intacct nonprofit accounting software is ideal to help meet your needs. Commercially available accounting https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ software offers adjustable templates that you can tailor to the revenue or expense categories that are most relevant to your operation. And internally, by analyzing revenue sources and spending patterns you can identify which programs are thriving, which areas need more funding, and where you have inefficiencies.

Statement of activities (income statement)

• The nonprofit statement of activities and the income statement are two different terms that refer to the same report.
• You can publish the statement of activities on your website, in your annual report, or share it directly with your donors and any grant-making organizations you depend on.
• Fees paid by your supporters in exchange for privileges, such as newsletters, information, contacts, or access to events.
• Keeping in mind the net costs for every department, you can check out sample financial statement templates to get a better idea of what should such kind of a sample sheet contain.

By hosting virtual events, you’re able to cut down on expensive venues and catering while still bringing in funds. When attending in-person isn’t possible, accounting services for nonprofit organizations donors and supporters may appreciate a virtual event. However, 63% of people want to see proof that nonprofits follow a set of guidelines and ethical principles. According to a recent Independent Sector study, nonprofits are still among the most trusted institutions in America, with 57% of people saying they have “high trust” in them. Increase your desired income on your desired schedule by using Taxfyle’s platform to pick up tax filing, consultation, and bookkeeping jobs. Money that flows in and out of the organization due to activities related to debts and borrowing activity, like loan and note payments made each month as well as any income from stocks and bonds.