Nonprofit Financials: What to Share With the Board and How Often
When it comes to nonprofit financials, it’s wise to know what to share with the Board of Directors and how often to do so. A well-informed Board has all the financial information necessary to best fulfill the nonprofit’s mission, strategies, and goals. What’s more, Board members are legally responsible for being aware of the organization’s financial operations. Here’s what to share with the Board and how often, as well as tips for helping to avoid information overload.
Types of Nonprofit Financial statements
Most nonprofits review their financial statements monthly, quarterly, and annually, with the Board reviewing them at least quarterly. The financial statements should include:
- Statement of Financial Position (or a Balance Sheet)
- Statement of Activities (aka Statement of Revenue and Expenses or an Income Statement)
- Statement of Cash Flows
Where applicable, these statements should include budget-to-actual for the organization’s income and expenses. Every nonprofit organization should have an annual budget, so the Board should review the budget vs. actual for the current month and year-to-date (YTD).
Form 990 is an informational tax form that most tax-exempt organizations must file annually. It provides the IRS with an overview of detailed financials as well as the organization’s activities and governance. The IRS carefully reviews each Form 990 to ensure the organization correctly conducts itself as a designated 501(c)(3). Also, both the general public and funders have access to an organization’s Form 990, so its importance as a communication and marketing tool can’t be understated. Therefore, the Board should always review the organization’s Form 990 before filing with the IRS or sharing it with the public.
Board members must rely on financial information that is both highly accurate and timely. It helps them to make difficult decisions, especially when deciding where to invest additional funds (if available) or where to cut from if funding dries up.
Tips for avoiding information overload
Since financial statements are often complex and include lots of detail, you’ll want to avoid overloading your Board with too much information. Here are helpful tips simplifying the data for a better, high-level view of the organization:
- Create a consistent report format for the Board using either accounting software or a spreadsheet program. Include critical key performance indicators (KPIs) and trends.
- Utilize summary categories for income and expenses so board members can better understand and focus on the big picture for more intelligent decision-making.
- Include brief explanations with each financial statement or report. Use those synopses to highlight essential items, and be sure to explain any deviations from expectations.
If you feel like you need help with your nonprofit’s financial reporting, we’re happy to lend a hand. When you team up with our friendly nonprofit accounting experts here at Qbix, you’ll get all the accounting help you need. That includes accurate reports and compelling insights for your nonprofit organization — all available at any time and from anywhere. Can you imagine creating fast, accurate financials with clear visuals that are easy to understand? Imagine no more. Save yourself tons of time, money, and stress, and schedule a free consultation with us today.
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Qbix's goal is to provide the latest cloud-based accounting technology while delivering real-time visibility into your nonprofit's financials 24/7. Numbers are our passion, but providing your nonprofit with the financial expertise needed to facilitate growth and profitability is our top priority. And because no two organizations are the same, Qbix offers the flexibility you need to accomplish your nonprofit's goals.
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