You’ll need https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ to record information about your organization’s expenses and revenue on your tax forms. Between your statement of activities and statement of functional expenses, you’ll be all set to file your Form 990 accurately each and every year. It lists crucial financial KPIs for a specific period, such as revenue, expenses and overall financial performance.
Safeguard Your Financial Integrity with Effective SOA Management
The definition of a financial statement is a simple report that can be pulled together monthly (or as-needed) to give you a view of your financial health. It’s probably the most practical financial statement a nonprofit Executive Director or CEO has for making intelligent decisions for their organization. To decide which basis is right for your organization, learn more about cash basis vs accrual basis accounting in nonprofits. The Statement of Activities summarizes the money you’ve received (revenues) and the money you’ve spent (expenses) during a given period.
Simplify Report Generation
The changes in net assets section of the Statement of Activities gives stakeholders a clear picture of the organization’s financial health. Understanding these changes and trends can guide strategic decision-making, helping to ensure the organization’s long-term sustainability. This means that the Statement of Activities reports on all the revenue earned, expenses incurred, and changes in net assets within this annual period. So even though nonprofits aren’t designed to generate profits, they still have revenue and expenses that must be meticulously accounted for. A Statement of Activities, often compared to the Income Statement of a for-profit business, is a critical financial document for any nonprofit organization.
Best Practices for Nonprofit Financial Statements
These may include personnel costs, professional services, office expenses, occupancy, utilities, and depreciation. Reporting noncash investing and financing activities requires separate disclosures. Examples of these activities may include receiving contributions of fixed assets or securities, purchasing a building by incurring a mortgage, or obtaining an asset by entering into a capital lease.
- FastFund Accounting automatically generates your Statement of Activities with the proper segregation of revenue classes and expense functional categories.
- It reflects the difference between revenues and expenses over a specific period.
- These changes would free up additional funds that could be used to support additional programs or services offered by the Foundation.
- The nonprofit statement of activities (or income statement) is a financial report that shows your organization’s revenue and expenses over time, ultimately allowing your organization to analyze your net assets.
- The operating activities section of the SCF reports the changes in cash other than those reported in the investing and financing sections.
- To avoid this mistake, organizations must develop robust systems for tracking and reporting on restricted versus unrestricted funds.
Questions About Generating More Revenue?
Accurate reporting provides stakeholders with insights into an organization’s resource acquisition and its ability to fulfill its mission. A clear understanding of diverse revenue streams and their proper categorization is essential for a comprehensive financial picture. If your nonprofit organization does not have permanently restricted assets this statement of activities form was designed for you.
Reporting Period
It automates and facilitates these comparisons, allowing for more efficient monitoring and decision-making. Encouraging a culture of regular financial review within the team will also help you catch discrepancies and address them promptly. Conversely, a statement of activities with natural classification would only list the expense types, such as salaries, utilities, office supplies, and others.
Importance of Regular Review by Stakeholders
- Your goal is to try and automate as much as you can of revenue tracking, expensive categorization, and report generation, so that you can produce more consistent statements.
- The more common revenue and expense categories are preprinted along with lines on which to enter your organization’s amounts.
- Understanding your finances and resources is extremely important to a nonprofit, because it provides insight as to whether or not you have the required resources to fulfill your mission.
- If the revenues earned are a main activity of the business, they are considered to be operating revenues.
- Our dedicated team is here to support you in managing your nonprofit’s finances and achieving long-term sustainability.
The SOA report shows a nonprofit organization’s income, expenses, and net income for a specific period of time, all or part of a fiscal year. The report reflects the changes to an organization’s net assets resulting from financial activities that occurred during the fiscal year. The nonprofit statement of activities is one of the primary nonprofit financial statements. It is basically the nonprofit income statement because nonprofit entities do not have an income statement. The purpose of the nonprofit statement of activities is to provide details about transactions of the nonprofit entity how those transactions are providing for the organizations various programs and services.
This article is for informational purposes only and should not be considered financial advice. Tom is a multi-disciplined leader with over a decade of experience in nonprofit operations, technology leadership in government, and over two decades of servant leadership. The first step in reading a Statement of Activities is to understand its purpose.