If you run a non-profit, you’re tasked with convincing people to donate their money or time to your cause. This is arguably one of your most important duties, but it’s far from the only one. If you want your organization to keep inspiring good in the world, you need to master the art of managing non-profit finances, too. Here’s a look at some of the essentials of non-profit financial reporting and why they matter.
Cash Flow Projection
This is a useful metric for planning ahead. As the name suggests, a cash flow projection looks ahead 12-15 months at a time to forecast whether you’ll be able to pay all of your expenses.
The cash flow projection is an essential part of any non-profit audit because it can spot upcoming cash shortfalls before they happen. If you see an issue on the horizon, you’ll have time to remedy it before it becomes a reality.
Statement of Cash Flow
While it’s somewhat related to your cash flow projection, your statement of cash flow is different — it simply tracks how money moves into and out of an organization. This statement helps you evaluate how well your current cash flow management is working (and whether you need to make changes).
Statement of Activities
Reputable non-profit organizations are as transparent as possible with donors. When it comes to communicating how donations are used, the statement of activities (also called an “income statement”) is ideal.
Even if a donor doesn’t have a financial background, they’ll likely find the statement of activities easy enough to understand. This statement outlines:
- Net surplus
Typically, statements of activities are created each month, although year-to-date summaries are also useful. Consider releasing a “budget to actual” statement for added transparency in your non-profit audits. This statement shows your actual statement of activities against your budget. That way, donors can see how closely you’ve followed your budget.
Statement of Financial Position
If you need a current snapshot of your non-profit’s financial health, a statement of financial position (also called a balance sheet) is exactly what you need. This statement will show you net assets, assets, and liabilities.
While each individual statement of financial position stands on its own (with no comparison to past statements), they can be incredibly valuable if you want to assess progress.
For example, say you’ve had many more fundraisers and donations this year than last. If you want to see if your non-profit is doing better now, you can create a current statement of financial position and compare it to one made at the same time last year.
Do You Have to Navigate Non-Profit Finances Alone?
As you can see, a lot goes into managing your non-profit’s finances. Fortunately, you don’t have to handle every aspect of finances yourself. Outsourcing your audits, tax prep, and other financial processes ensures you have enough time to manage the rest of the organization.
It also reduces the risk of making costly errors on your taxes. And fortunately, outsourcing your finances is much less costly than you might think!
Need California Non-Profit Audit Services?
At EWA, we’ve been supporting non-profits for more than two decades. We’re familiar with the constantly changing regulatory landscape around non-profits, so we can make sure that your organization is fully compliant. If you need your non-profit’s taxes prepared, California non-profit audit services, or both, reach out to us today!