A Detailed Guide on Nonprofit Balance Sheets +Sample

While the process can be tedious, compiling nonprofit financial statements allows your organization to evaluate its financial standing and stay accountable to stakeholders. These documents help you use resources effectively to fulfill your nonprofit’s mission. Utilizing the reporting best practices and template guidance provided empowers nonprofits to produce financial statements tailored to their programs and needs. The Key Benefits of Accounting Services for Nonprofit Organizations Though finance management may not be a nonprofit’s main focus, dedicating time to polish these critical documents pays dividends when it comes to oversight, public assurance, and funding opportunities. Financial statements prepared with care and accuracy help nonprofits continue changing lives and making a difference. It’s important for non-profit organizations to carefully manage and track these assets to ensure compliance with donor restrictions.

Step 1: Financial Statements

Assets are typically listed in order of liquidity (how easily they can be converted to cash). When you’re a Pro, you’re able to pick up tax filing, consultation, and bookkeeping jobs on our platform while maintaining your flexibility. 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. Knowing the right forms and documents to claim each credit and deduction is daunting.

Use in Evaluating Organizational Performance

Non-profit organizations should regularly evaluate their long-term liabilities and develop strategies to manage and reduce them if necessary. A current ratio of 2 means that the non-profit organization has $2 in current assets for every $1 in current liabilities. By calculating depreciation, non-profit organizations can determine the current value of their fixed assets and make informed decisions about their future use. Understanding the composition and utilization of net assets is essential for evaluating the financial stability and effectiveness of a non-profit organization. It allows stakeholders to assess the organization’s ability to meet its financial obligations, invest in future growth, and fulfill its mission in the long run.

Financial Statement Analysis Template

They have to prepare a Balance Sheet that relates to certain terms, in specific to Nonprofits’ work plans. These terms can be seen in the above templates such as ‘Restricted Net Assets and Unrestricted Net Assets’. These technicalities are understood by experts and are relevant for their study and analysis.

Things to Look Out For on the Statement of Activities

The Statement of Cash Flows is one of the core external nonprofit financial statements required for an independent audit, so you should be familiar with it. For that reason, we default to talking about accrual basis accounting in this article. A nonprofit’s expenses usually include all cash flowing out of the organization during the period. Plus costs incurred but not yet paid, like payroll that won’t be paid until next month or vendor invoices with 30-day terms. It provides insights into how the organization raises capital and manages its debt and equity. This ratio measures the percentage of expenses that a nonprofit organization is spending on its core mission.

This makes it easier for your accountant to pull the data and for your team to refer back to the source for more detailed information as needed. Equity is a crucial aspect for nonprofit organizations as it represents the financial health of the organization. It is depicted on the balance sheet and shows the value of the organization’s assets after deducting its liabilities. Maintaining a positive equity ensures the organization’s sustainability and ability to fulfill its mission.

⃣ Statement of functional expenses

As we mentioned earlier, many nonprofits use these financial statements in their annual reports to show transparency and build trust in their organization. In this article, we’ll explain more about each financial statement, why and when nonprofits need financial statements, and share examples of how organizations have used them in their annual reports. Because financial statements are the most efficient way to measure financial health, it’s imperative that organizations create a process to produce accurate statements. One type of financial statement that gives readers a detailed view of how the organization is doing is the balance sheet.

Nonprofit Balance Sheet Framework

• Liquidity refers to how quickly an asset can be converted into cash without significant loss in value.
• It involves comparing the financial data from different periods to identify patterns and changes in the organization’s financial position.
• These funds thus ensure long-term stability and growth and form the cornerstone of nonprofit net equity.
• If your organization uses cash-based accounting, nonprofit balance sheets may not provide an accurate snapshot.
• This line is a direct connection with and should be equal to the bottom line of an organization’s income statement (also called a Statement of Activities or profit/loss statement).

Gather all your financial statements, such as your income statement, cash flow report, and any other key documents. These form the basis of creating a nonprofit balance sheet that provides a full view of your organization’s financial health. A nonprofit balance sheet provides details about your organization’s financial health as of a specific date. Also called a Statement of Financial Position, this report summarizes your nonprofit’s liquidity and financial flexibility through its assets and liabilities.

A well-structured balance sheet tells the financial story of your nonprofit with precision and professionalism. Proper accounting for net assets tells the story of stewardship, strategy, and impact, not just compliance with nonprofit accounting principles. Understanding the full spectrum of nonprofit liabilities from short-term accrued expenses to large loans—is more than just crunching numbers—it’s building clarity and confidence. A strong nonprofit liabilities overview ensures your organization has a clear path to meet its obligations while advancing its mission. Think of current liabilities as a to-do list your nonprofit must undertake within the coming year.