Use accounting software to improve your balance sheet The Key Benefits of Accounting Services for Nonprofit Organizations accuracy and efficiency. For example, they may contribute directly to program beneficiaries, or they may function more as program service expenses supporting the mission. While these practices are standard, they can sometimes lead to exaggerated revenue reporting if you’re not careful. If you use the accrual method of accounting, you might record revenue before certain funds are actually received. This refers to cash available for immediate use, such as physical cash and money in checking or savings accounts. This distinction is rooted in the fact that nonprofits don’t have owners or investors in the traditional business sense.

• They should also let you track how your income and spending for the year compare to your budget goals.
• When a for-profit business has assets, they can usually use them however they want– to buy equipment, give raises, invest in real estate– but nonprofit assets are often more complex.
• Once you’ve got a bookkeeping system in place, you need to start creating financial statements.
• This template can be used for a Nonprofit for such a purpose and can be extremely handy.
• It is essential for nonprofits to track and categorize their expenses accurately to ensure transparency and accountability.

What Is A Cash Flow Statement?

This template is organized into the typical balance sheet categories and makes it easy to organize your nonprofit’s numbers. This resource hub includes a variety of https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ free nonprofit tools and templates designed to streamline your operations and maximize your impact. Having individuals with expertise in composing, reading, and analyzing balance sheets is important to fulfilling a nonprofit’s mission. If your organization needs such expertise, consider hiring indinero’s accounting experts. We’ll provide expertise at a fraction of the cost of a full-time employee or in-house team. When it’s all put together, a nonprofit statement of financial position is a pretty straightforward document.

Liquidity

Net assets increase when the organization receives income and decrease when the organization incurs expense. Note on Accounting PoliciesDescription about the nonprofit’s accounting policies.2. Sort the data into categories like revenue (donations, grants, service fees, etc.) and expenses (program-related, administrative, fundraising, etc.). We’ve created each free non-profit template and downloadable resource to support the great work that charities, nonprofits, and NGOs do. Read through it and see if you can draw any conclusions about Acme Nonprofit’s current financial status. Afterward, we’ll walk through what a donor might think when reviewing this information.

types of nonprofit financial statements

After releasing the first $20,000, as shown on the income statement, the remaining balance of the grant award for years two and three is shown on the balance sheet as assets with donor restrictions. These funds are included in the total net assets on the balance sheet, but they are not actually available to the organization to use in any way except according to restriction. For this reason, it is strongly recommended to report restricted dollars separately, and to pay particular attention to the unrestricted amounts when planning and making operational decisions. In addition, directors and managers need adequate training to understand the nuances of restricted funds that present financial management challenges unique to nonprofit organizations. A nonprofit’s financial statements tell the story of how successfully it is advancing its mission and sustaining operations.

• Where current assets were all about liquidity, non-current assets are all about stability.
• The order of liabilities on your statement of financial position depends on their due date, with short-term obligations listed before long-term ones.
• For instance, nonprofits report net assets rather than equity and classify these assets based on restrictions (unrestricted, temporarily restricted, and permanently restricted).
• It provides a clear picture of the organization’s financial health and sustainability.

Accounting Requirements

Likewise, liabilities should be separated into current and long-term obligations, clearly distinguishing short-term payables from ongoing financial commitments. For example, if your nonprofit receives a general donation, the money from that becomes an unrestricted asset. These resources are crucial to have on hand so that unexpected financial needs can be met without having to use restricted funds. Each class of asset plays a different role in maintaining the cash flow that supports operations and drives impact. So let’s dive in so you can feel confident navigating nonprofit asset management.