This statement shows your organization’s assets, liabilities, and net assets. In other words, it shows what you own, what you owe, and what your organization is worth financially. Your nonprofit’s nonprofit accounting basics statement of financial position is also known as your nonprofit balance sheet. This statement shows the financial health of your nonprofit by laying out your assets, liabilities, and net assets.
Donor data is useful for building relationships, but it can clog up your accounting system. Separate financial information from donor information to keep your data organized. However, accounting is a key element to changing the world through a nonprofit organization.
Don’t overthink overhead expenses.
However, nonprofit accounting isn’t just about pulling important information. You also need to understand how to use this information to implement best practices for effective accounting decisions. Since 2017, you’re also required to disclose the “nature” of the activities your nonprofit lists on this report.
It’s also a good idea to include a column for notes on how numbers were calculated or any unusual circumstances. In fact, some retained earnings are a necessary protection from unstable economic conditions and unforeseen circumstances. Compile all of these policies in a handbook to serve as a reference https://www.bookstime.com/articles/what-is-opportunity-cost for your employees. Make sure the document can easily be updated as your nonprofit grows—you may eventually need more involved procedures for handling different types of funding. Create a realistic annual business budget for your nonprofit and a three- to five-year plan for strategic initiatives.
A Nonprofit’s Guide to Accounting
Encourage your donors to judge your organization based on your impact in the community rather than how much you spend on fundraising and administrative expenses. Luckily, here at Jitasa, we don’t think nonprofit accounting is tedious at all! We’ve loved helping over a thousand organizations organize and maintain their finances. Due to this love of the craft and experience in the field, we decided to put together this guide to help nonprofits like yours better understand their accounting needs.
Xero offers a wealth of features for nonprofits looking for online accounting software. If you’re running a small team, their online software allows you to pay employees on the fly. Their software also features a dashboard view that’s great for a bird’s-eye view of overall expenses, including overhead expenses. This nonprofit accounting statement breaks down the operating, financing, and investing activities to show how cash moves at the organization.