The Statement of Financial Position is the Balance Sheet of a nonprofit organization. Donorbox is an affordable and simple-to-use online fundraising tool with powerful fundraising features such as Recurring Donations, Crowdfunding, Peer-to-Peer, Events, Memberships, and more. You can Top Benefits of Accounting Services for Nonprofit Organizations You Should Know also manage donors, send them automated donation receipts, add offline donations, let donors login and manage their accounts themselves, and more on Donorbox.

Why are Nonprofit Financial Statements Important?

It is important for nonprofits to accurately record and report their revenue and support to maintain transparency and accountability. By doing so, they can demonstrate their financial stability and attract potential donors and funders. To present the net assets section in a structured manner, a table can be used to summarize the different categories of net assets, such as unrestricted, temporarily restricted, and permanently restricted. The table should include the dollar amounts for each category and provide a total for the net assets.

Asset Management

• Monitoring your net assets over time is crucial for understanding your organization’s financial health and making informed decisions.
• They are prepared based on Generally Accepted Accounting Principles (GAAP) and help organizations make resource allocation and other strategic decisions.
• In order to accurately report the amount in each of these subgroups, it may be necessary to allocate some management and general salaries to fundraising based on the time spent by employees performing fundraising activities.
• The nonprofit statement of financial position is also known as a balance sheet, which is what for-profit organizations usually call their equivalent statement.
• This high-level overview provides the clearest picture of financial standing for the organization and often serves as a roadmap to decision making.
• They also play a crucial role in ensuring nonprofits remain accountable to stakeholders.

If your assets increase and your liabilities stay the same, then your net assets will also increase. But if your liabilities increase without any corresponding increase in assets, then your net assets will decrease. Nonprofits should include balance sheets in their organization’s annual reports and when filing Form 990 with the IRS. This case study demonstrates how a nonprofit can use its Statement of Financial Position not just as a reporting tool, but as a strategic asset for making informed decisions that ensure long-term sustainability and success. Similar to LLS, Heifer International has an entire page on its website devoted to sharing its financial information with stakeholders, including a graph that maps out its expenses over the fiscal year. The nonprofit even compares its results with the Better Business Bureau standard for charities, stating that it has gone above and beyond by allocating 75% of funds to program expenses and 21% to fundraising activities.

Wrapping Up: Understanding Your Nonprofit’s Financial Health

We’ve created an example below to show you what a nonprofit statement might look like. If you are ready for an accounting system that understands the needs of your organization, check out our guide, How to Save Time and Make Informed Decisions with Blackbaud Financial Edge NXT Reports. When starting a new project or attempting to solve a problem that in any way involves finances, your first https://greatercollinwood.org/main-benefits-of-accounting-services-for-nonprofit-organizations/ stop should be the Statement of Financial Position. This high-level overview provides the clearest picture of financial standing for the organization and often serves as a roadmap to decision making.

Definition and Role of the Statement of Financial Position in Nonprofit Financial Management

The best way to create accurate, useful financial statements for your organization is to work with a nonprofit accountant. Since many nonprofits don’t have a full-time accountant on staff, consider outsourcing your accounting needs to a nonprofit-specific firm like Jitasa. So, when reading a statement of financial position a healthy nonprofit will have assets that are greater than their liabilities and their net assets will have a large surplus to be used to achieve its goals in the future. As a nonprofit, your mission is your main goal, however a net asset surplus is key to the growth and sustainability of the organization. This amount calculates cumulative difference between revenue and expenses over the course of your organization’s life.