Non-Profit Financial Statements

A checklist and guide to better mission fulfillment through financial reporting.

Big Picture:

Assess Current Activities:

Monthly reconciliations

Review

Board Oversight

Considerations:

Documentation of the Financial Process :

Do you want to go all in or try something out?

You don't have to start from scratch.

Set priorities and make a plan to accomplish your goals.

Other ideas to consider:

Big Picture:

Regardless of the size and success of your organization you mind find a point or two listed here to take you to the next level of financial success. While there is a usual order of items to build upon, some may not be as useful or necessary for you. Some may be more important to do before others.

Keep in mind, the big picture of your organization.

Brainstorm: What are the biggest needs your organization has in the next 12 months? List them.

Out of the items listed above, what is the overarching priority that deals with finance of the organization? Write it here.

Assess Current Activities:

Use this checklist to gather information about your current processes and decide what next step would benefit you the most.

Monthly reconciliations

Check off each item you confidently know is happening within your organization.

1

Data entry by one person with oversight by another?
2

All accounts where a statement is provided (checking, savings, money market, certain loans, etc) are reconciled monthly?
3

Unreconciled items in the register are reviewed and addressed within 3 months of creation date?
4

Restricted items are clearing tracked
5

Board designated items are clearly tracked
6

Expenses are tracked for funcationality and by nature of usage to the level of detail to satisfy FASB standards and program measurements.
7

Internal controls clearly define accountabilities of each person involved in financial procedures
8

Accounts receivable reviewed
9

Accounts payable reviewed
10

Financial assumptions clearly state policies for financial procedures

Review

Check off the items that are currently a part of your organization's review process.

1

Someone in charge of data entry and categorization
2

Someone other than who entered data is reviewing reports after reconciliations
3

A timeline is set for reconciliation, review, and availability to the board
4

Finance committee in place to oversee larger financial matters
5

Someone in charge of contracts
6

Someone in charge of grant submissions
7

Someone in charge of inter-account bank transfers
8

Someone approves all program budgets and expenditure
9

Someone in charge of reimbursements
10

Someone reviews and approves all bills and payments
11

Someone manages petty cash fund. Cash payments are the exception not the rule.
12

Someone in charge of categorization and release of restricted funds
13

Someone in charge of donor thank you letter acknowledgements
14

Annual review of paid time off and payroll
15

Review income statement for each program or cost center

These reports are currently reviewed monthly

1

statement of activities (profit & loss)
2

statement of financial position (balance sheet)
3

budget vs actual
4

narrative of budget vs actual
5

restricted balances
6

designated balances
7

event profitability
8

program profitability
9

cashflow
10

accounts payable
11

accounts receivable

Board Oversight

Board members can easily tell (or know where to find)

1

What the net loss/(gain) was for a specific time period
2

How much money has been restricted for a specific account
3

How much money has been designated by the board for a specific commitment
4

Whether an expense was related to fundraising, programs, or administration
5

Understand the profitability for each program
6

The financial position (liquidity) of the organization

Check off the items that are currently a part of your organizations process

1

Each board member reviews monthly reports
2

Each board member asks questions about financial reports
3

Each board member understands the basics of financial reporting
4

A big picture review of financials of the organization
5

Review and sign off of 990
6

Review and sign off of next year budget
7

Review and sign off of scenario or multi-year budgets
8

Risk management and mitigation conversations annually
9

Reviews Executive Director's performance annually and establishes the salary
10

Two members of the board are appointed by the board to be authorized signers on bank accounts
11

Reviews and advises staff on internal controls and accounting policies and procedures
12

Determines whether the organization should have an audit

Considerations:

Checking a task off a list is one thing but what does all of it mean? How do you use the reports to interpret your data and make better decisions?

Below are a few considerations.

Can your organization cover regular operating expenses with unrestricted revenue?

Are you revenue streams diverse?

Is there a main source of revenue that is lacking or could be improved?

Are your revenue streams reliable?

Is there anything happening within the climate external to the organization that could negatively impact future funding?

Documentation of the Financial Process :

Documentation of the financial process is especially important when you have a few people covering multiple roles. It allows for others to continue these important processes if someone should leave permanently or temporarily. It creates an easy way to train new staff and ensure clear communication of each person's contribution.

Review your processes annually and refer to them regularly to ensure that policies are maintained.

List every position within your organization and what part of the financial process they are accountable for. Be clear with timeframes and specific deliverables.

What are your revenue sources? Think about how these could tie into your budget or goals. What would be important to test and measure? Do you measure breakeven? These should be program related income such as Training Sessions, merchandise, etc. List

What are your revenue streams? Who buys your products/services? Think about how tracking the information by groups might help you to better understand trends and project the future. Do different types of groups buy products at the same price level?

What tracking tools do you use to organize your financial information? Do you use Paypal, Stripe, or Square? Do you use QuickBooks Online, Desktop, or another accounting system? Are files saved in Dropbox? List every program used in your processes.

What is the policy regarding credit cards? Consider both receiving credit cards and using them.

What is your process for recording restricted funds?

What is your policy for recording programs and grants within the financial books?

What is your policy for recording programs and grants outside of the accounting software? Are there cost structures or spreadsheets?

How does your organization account for accrual of items such as insurance, vacation time, etc?

What is your process for monthly account reconciliations?

What is your policy for petty cash?

What are your policies on property and equipment? How does depreciation fit into this picture?

What are you policies on personnel records? Are I-9, W-9, and W-4 filled out upon hire? Where are these items kept? Is there an employee handbook?

What is your policy and process regarding payroll? Consider types of workers, timelines, holidays, vacation, etc. What programs are used and how is oversight being practiced?

What are the end of your processes in regards to finance? Who reviews what and when do they review? What outside parties (bookkeeper, CPA) are involved?

What is the process for monthly reporting? What reports are produced, when are they produced, and who do they go to?

What other components of your organization require documentation? Are there endowments or operating reserves?

What are your annual budget processes? Do you create scenario budgets or multi-year budgets?

How does your organization determine and mitigate risk?

Do you want to go all in or try something out?

Consider whether or not you have full buy-in from your employees? People tend to not like or welcome change. Often, to be worthwhile the potential gain has to be twice the potential loss of trying something new.

An easy way to work around this is to have an experimental period. For a change that you think would make a meaningful positive impact on your business, consider if a trial run of the product, service, or new procedure will win people over.

The benefits of doing an experiment rather than rolling in a big change are:

demonstrating that things don’t have to be perfect
give you solid data specific to your situation on whether it will work or not
it's easier to say yes to a trial - easier to get people (even yourself) on board
allows you to change your mind

When doing a trial experiment keep in mind

continue the practice long enough to know if it is worthwhile but not a waste
experiments have no risk
use resistance as an opportunity to experiment

What areas do you feel would best be served with a short term experiment rather than change?

What areas do you feel are important enough for you to make a leadership decision that change must occur?

You don't have to start from scratch.

Which of the tasks below are possibilities for you?

Choose data management practices that may work for you.

1

We know what data is valuable to our business, where it lives, and have a plan for the future.
2

Documents live in ONE location (or specific types in one location like Dropbox and other types in Google Drive)
3

Documents can be accessed by one person at a time or updated by multiple people simultaneously - no more emailing back and forth
4

Training documents for new hires include language about data management
5

We have an index of company information and everyone knows where to find it
6

Our information is organized into the most intuitive locations
7

We annually review data creation and storing to ensure that protocols are being followed and kept up to date
8

Our data has been scrubbed for accuracy and is being used fully

Set priorities and make a plan to accomplish your goals.

As a leader, there are many actions you could take each day to grow your team and organization. Looking at the big picture and prioritizing must be a regular part of your process. Determine where the most value for your time investment will be recognized and will progress you towards your objective.

Once you have set a priority it is time to create a plan so that what you want will actually be realized.

Review this checklist and your answers. Write down the top five data management practices that would make the most impact toward your objective.

Goal #1: What strategies can you use to accomplish this goal?

Goal #1: What actions can you take this month to get started? Make a list here and then plug them into your calendar for the next month. Set a reminder to do the same thing at the end of the month.

Goal #2: What strategies can you use to accomplish this goal?

Goal #2: What actions can you take this month to get started? Make a list here and then plug them into your calendar for the next month. Set a reminder to do the same thing at the end of the month.

Goal #3: What strategies can you use to accomplish this goal?

Goal #3: What actions can you take this month to get started? Make a list here and then plug them into your calendar for the next month. Set a reminder to do the same thing at the end of the month.

Goal #4: What strategies can you use to accomplish this goal?

Goal #4: What actions can you take this month to get started? Make a list here and then plug them into your calendar for the next month. Set a reminder to do the same thing at the end of the month.

Goal #4: What strategies can you use to accomplish this goal?

Goal #4: What actions can you take this month to get started? Make a list here and then plug them into your calendar for the next month. Set a reminder to do the same thing at the end of the month.