Here's a breakdown of the three main financial statements typically included in a non-profit financial report:
1. Statement of Financial Position (Balance Sheet):
This statement provides a snapshot of your nonprofit's financial health at a specific point in time, typically the end of your fiscal year. It's like a financial photograph, categorized into three main sections:
Assets: Everything your non-profit owns or controls with economic value, such as cash, investments, property, and equipment.
Liabilities: The money your non-profit owes to others, such as unpaid bills, loans, and accrued expenses.
Net Assets (Fund Balance): The difference between your assets and liabilities. This represents the cumulative financial resources your non-profit has generated over time.
2. Statement of Activities (Income Statement):
This statement summarizes your nonprofit's financial performance over a specific period, usually a fiscal year. It shows where your revenue came from (contributions, grants, fundraising events) and how you spent that money (program expenses, administrative costs).
Revenue: All the income your non-profit generated during the period.
Expenses: All the costs your non-profit incurred during the period to deliver its programs and maintain operations.
Net Assets Change: This reflects the difference between your revenue and expenses. A positive number indicates your net assets increased, while a negative number indicates a decrease.
3. Statement of Cash Flows:
This statement details the cash inflows and outflows of your non-profit during a specific period. It categorizes these cash flows into three main activities:
Operating Activities: This includes cash received from donations, grants, and program fees, contrasted with cash spent on program delivery and administrative expenses.
Investing Activities: This includes cash used to purchase or sell investments.
Financing Activities: This includes cash received from loans or contributions restricted for capital expenditures, contrasted with cash used to repay loans.
Building Your Financial Statements:
While the specific format may vary depending on your accounting practices, most non-profit financial statements follow a standardized structure. Here's a general process for building them:
Gather Your Financial Data: This includes records of your income sources, expenses, assets, and liabilities.
Categorize Transactions: Classify your financial data according to the appropriate categories within each financial statement.
Calculate Totals: Sum up the amounts in each category to generate the final figures for your statements.
Review and Ensure Accuracy: Double-check your calculations and ensure the information presented is accurate and reflects a true picture of your nonprofit's financial health.
It's important to note that this is a simplified overview. Non-profit accounting can involve complexities, and consulting with a qualified accountant is highly recommended, especially for larger organizations.