One of the things you need to do when you’re running a nonprofit organization is to keep track of your financial statements. This includes creating a nonprofit statement of activities. In this guide, we’ll explain what a nonprofit statement of activities is, why it’s important, and how to create one for your organization.
What is a Statement of Activities?
A nonprofit statement of activities is a financial statement that shows the income and expenses of your nonprofit over a period of time. This statement can be used to track your progress and make sure that your nonprofit is staying on budget. It is similar to an income statement for a business.
Why is a Statement of Activities Important?
A nonprofit statement of activities is important because it helps track the progress of your nonprofit and, in addition, it indicates whether or not you are staying on budget, which is crucial for financial management. This statement can also be used to help you apply for grants and other funding opportunities. If you’re on budget or have a surplus, it will show potential donors that you’re a responsible organization. However, if you’re facing financial challenges, such as overspending, you may need to take a look at your expenses and see where you can cut back or look for other opportunities to get funding. Creating a nonprofit budget template can be a valuable tool to organize your financial data, plan for future expenses, and ensure fiscal responsibility within your organization.
Furthermore, a statement of activities gives you another opportunity to be transparent and accountable to your donors. Many nonprofits are required to submit their statement of activities to the IRS, and some nonprofits choose to make their statement of activities available to the public on their website.
What is Included In The Statement of Activities?
There are two levels to the statement of activities; the summary level and the program level.
The summary level includes all of the nonprofit’s income and expenses. This is a good overview of the nonprofit’s financial health.
The program level goes into more detail and breaks down the income and expenses by program. This is useful for tracking the programs that are doing well and those that need more funding.
Within both levels, information is given indicating the income and expenses of the nonprofit. Income sources can consist of things like grants, donations, and investment income. Expenses can include things like salaries, office expenses, and program expenses. Looking at both of these levels will indicate whether the nonprofit is running at a surplus or a deficit.
How to Create a Statement Of Activities
There are a few different ways that you can create a nonprofit statement of activities. You can hire an accountant to do it for you, use accounting software, or do it yourself.
If you hire an accountant, you will want to oversee it to ensure it’s done correctly. This is the most expensive option, but it’s also the easiest for you.
If you use accounting software, you’ll need to input all of the information manually. This can be time-consuming, but it’s not as expensive as hiring an accountant.
You can also do it yourself without any assistance if you’re familiar with accounting. This is the least expensive option, but it’s also the most time-consuming.
No matter what option you choose, you need to gather all your financial information before you can create a nonprofit statement of activities. This includes things such as your non-profit’s bank statements, tax returns, and investment statements. Once you have all of this information, you can start creating your statement of activities.
Conclusion
A statement of activities is fairly straightforward to understand and create. Hopefully, this article has given you a better understanding of what it is, why it’s important, and how to create one for your organization. Nonprofit organizations can use this statement to track progress, stay on budget, and remain accountable to donors. So, take some time to create one for your own nonprofit today!