Every nonprofit board meeting includes a financial report. But if you’re being honest — do you fully understand what you’re looking at? You’re not alone. Many nonprofit board members and even some executive directors find financial statements confusing, especially when they weren’t trained in accounting.
Here’s a plain-language breakdown of the financial reports your nonprofit should be reviewing every month — and what to look for in each one.
1. Nonprofit Financial Reports: Statement of Financial Position (Balance Sheet)
This report shows what your organization owns and what it owes at a specific point in time. Think of it as a financial snapshot.
- Assets — Cash, accounts receivable, prepaid expenses, equipment
- Liabilities — Accounts payable, deferred revenue, loans
- Net Assets — The difference between assets and liabilities (your nonprofit’s “equity”)
Key question to ask: Is our cash position healthy enough to cover the next 60-90 days of operations?
2. The Statement of Activities (Income Statement)
This report shows your revenue and expenses over a period of time — usually a month, quarter, or year. It answers the question: did we take in more than we spent?
- Revenue — Grants, donations, program fees, events
- Expenses — Salaries, program costs, administrative expenses
- Change in Net Assets — The bottom line: did you end up ahead or behind?
Key question to ask: Are we on track with our budget, and are any expense categories running significantly over or under?
3. The Budget vs. Actual Report
This is arguably the most important report for ongoing board oversight. It compares what you planned to spend and earn against what actually happened. Significant variances — either over or under — deserve a conversation.
4. The Statement of Cash Flows
This report shows how cash actually moved in and out of your organization. It’s possible to show a surplus on paper but still have a cash flow problem — this report reveals that.
What Board-Ready Financials Look Like
Board-ready financials are clear, accurate, and delivered on time before every board meeting. They tell the financial story of your organization without requiring an accounting degree to understand.
| 📥 Download our free “Board Ready Financials” guide — available in the OakPath Nonprofit Resource Library at oakpathbookkeeping.com. Or schedule a free consultation to talk about improving your nonprofit’s financial reporting. https://oakpathbookkeeping.com/resources/ |