How to Write a Nonprofit Financial Picture Statement

Managing a nonprofit organization with integrity and responsibility requires a hard look at the donations coming in and the expenditures going out. Having a nonprofit financial picture to show your board and possibly your donors shows exactly how you are practicing good management in your organization and helps you know where budget problems might lie. Here's how to write a nonprofit financial picture statement so you can practice good management.

Instructions

1. Assign a financial committee. The board of your nonprofit should assign a treasurer and financial committee to synergistically perform the writing of the financial picture statement. Make sure the chief executive is part of this decision-making group.

2. Perform a monthly financial analysis for your nonprofit. Create income statements, which include how much money the nonprofit has taken in and how much has gone out. Also include cash flow, budget deviation, balance sheet and state of activities analysis in your monthly report. Make sure to do this every month in your nonprofit management schedule to create a long term financial picture. Use your monthly financial analysis sheets to gain information about budget variations, surpluses and deficits over time.

3. Know your lenders' requirements for financial statements. Good financial management of your nonprofit requires knowing what information the bank needs to assess the financial health of your organization.

4. Create a statement of financial position. This statement, which was formerly called a balance sheet, shows a snapshot of your nonprofit organization's finances at a specific time. This is required by most banks as part of your financial reporting. List assets, including current and fixed assets, liabilities, including current and long term liabilities and a statement of activities, which includes revenues, expenses, and how your net assets have changed over the past year.

5. Make a cash flow statement. Include investing and financing activities as well as any operation activities. You may want to ask your auditor to do this part of the statement for you.

6. Write a general statement of activities. This includes all the reports of revenues, expenses and any change in your yearly assets. This was formerly known as the income statement.

7. Have a flow diagram or chart drawn of your financial picture. Graphically showing your financial picture can give your board a better understanding of your nonprofit.