How to Understand a Nonprofit Balance Sheet: A Guide for Leaders and Supporters

This includes bank statements, invoices, receipts, payroll data, donation records, and any other financial transactions. Unlock sustainable funding for your nonprofit with our expert guide on venture capital strategies. Learn actionable tips to secure long-term financial support and propel your mission forward. Another long-term liability can be deferred revenue, linked with multi-year grants or donor pledges. Though this is long-term and therefore not urgent in nature, proper tracking is essential for long-range planning and accounting. If a nonprofit borrows money to build a community center the loan represents a form of long-term liability.

Sample Nonprofit Balance Sheet

As compared to cash, these assets are not very liquid—however—they are extremely important in relation to the long-term impact of your Accounting Periods and Methods work. You can also check out some Sample Expense Sheets for an additional and relevant information with regards to the subject matter, which in this case is balancing sheets for nonprofit organizations and the like. Learn how to build, read, and use financial statements for your business so you can make more informed decisions. Wave Accounting is another popular nonprofit accounting and bookkeeping software option that millions of businesses and nonprofits use. Wave features a user-friendly interface dashboard, access to payroll, accounting, and labor coaches, expense tracking, tax preparation, and more.

Format of Balance Sheet:

• It provides a snapshot of the company’s assets, liabilities, and equity at a specific point in time.
• This balance sheet template simplifies the balance sheet process by asking plain language questions and then a balanced balance sheet will be generated from those questions.
• Proper tracking helps avoid missteps in financial planning and builds trust with stakeholders.
• Nonprofits may also invest restricted funds that they can’t use for their nonprofit’s operations.
• This financial statement provides a snapshot of a company’s financial position, allowing decision makers to assess the company’s liquidity and financial health.
• For nonprofits that operate membership models, such as clubs, associations, or societies, membership dues are a primary revenue stream.

The scholarship foundation’s details fit well financial statements for nonprofits with what donors expect to hear from the organization. Finally, financing revenue comes from the earnings and interest earned on your financial activities and savings. Further, providing a single lump sum balance for net assets without donor restrictions often does not tell the full story. For instance, the total net asset balance in all three examples below is $100,000. The SOFP reflects the overall financial position of your organization at a given moment in time.

Using nonprofit financial statements as a powerful marketing tool

Think of current assets as the grease that keeps the wheels of your nonprofit well-oiled and moving forward. Current assets include, among other things, cash on hand, grants receivable, and other resources readily convertible to cash. Strong cash flow is critical in covering operating expenses like salaries, supplies, and events costs. If you are unclear where to start, this document is not as overwhelming as it might appear. You will want to start by adding up all of your nonprofit’s assets, from cash in accounts to office equipment. For a helpful visual, try Googling a nonprofit balance sheet example to help you understand how this process works.

• However, you can also use the next calculation (months of cash on hand) to calculate the liquidity of your nonprofit.
• While there may be some legitimacy behind your concern, there’s no need to panic just yet.
• This information is essential for making informed decisions about investments, loans, and overall business strategies.
• On the other hand, they share how these funds support students throughout their education.
• As a nonprofit professional she has specialized in fundraising, marketing, event planning, volunteer management, and board development.

• It also allows donors, grantors, board members, and the public to assess the organization’s efficiency and effectiveness in achieving its charitable goals.
• The auditors also make the statements interesting and target them to Save the Children’s English donor base.
• It includes items like your cash assets, accounts receivable, property and equipment investments, long-term receivables, prepaid expenses, and more.
• Examples include outstanding bills, accrued expenses, payroll and payroll tax liabilities, lines of credit, and short-term loans.
• Maintaining well-organized Nonprofit Financial Statement Templates ensures consistent bookkeeping and simplified reporting.
• Maintaining a positive equity ensures the organization’s sustainability and ability to fulfill its mission.

In nonprofit entities, the balance sheet is called a Statement of Financial Position. Just like a balance sheet gives readers a snapshot view of what a company is worth, the Statement of Financial Position quickly shows what a nonprofit organization owns and owes. The balance sheet – also called the Statement of Financial Position – serves as a snapshot, providing the most https://www.bookstime.com/ comprehensive picture of an organization’s financial situation. The debt to equity ratio measures financial leverage and demonstrates what proportion of organizational debt versus organizational net assets are being utilized to support the organization’s finances. The balance sheet—also called the Statement of Financial Position—serves as a snapshot, providing the most comprehensive picture of an organization’s financial situation.

The information presented on the statement is also required when a nonprofit is applying for tax exemption with the Internal Revenue Service (IRS). 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.

When do nonprofits need the balance sheet?

Nonprofit financial management evaluates the typical balance sheet or statement of financial position to ensure a sustainable financial future. While there are similarities in the basic principles of accounting, nonprofit financial statements focus on accountability to stakeholders rather than profitability. For instance, nonprofits report net assets rather than equity and classify these assets based on restrictions (unrestricted, temporarily restricted, and permanently restricted). Having templates and guides can make the process smoother for organizations focused on missions over money.