Non profit organizations receive income from a variety of sources including private donations, foundations and grants income. In addition, expenses vary widely from organization to organization. Learn about non profit cash flow statements in this helpful Bright Hub article.
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Non Profit Record Keeping
Most non-profit organizations are required by law to provide a snapshot of their financial statements at any time. They may be requested by donors or by Board of Directors members. Too often, organizations submit previous year’s final records to their donors to demonstrate their fiscal state. This can be helpful, but for donors searching for current information, a great deal of work often has to go into the creation of a current cash flow statement.
Many small non-profit groups often have treasurer's who change from year to year. This often means that the method of keeping financial records will change as well. By using a standard and simple to update profit and loss statement and cash flow statement, the record keeping can stay the same from year to year. This allows for a quick snapshot view of donations received, expenses paid and shows the financial strength of a nonprofit group at a glance.
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Cash flow Statements that Work for You
Setting up a cash flow statement that works for you is not difficult. The goal is to use simple journal entries and get totals quickly providing a snapshot view of the health of a non-profit. You can generally set one up in less than one hour and it will be valid until you make a dramatic change. In order to create a working cash flow statement you will need to do some initial work to set it up to work for you.
It is not difficult to set up an excel spread sheet to track your income and expenses and automatically generate a profit and loss statement. Here is how to create it:
A) Identify Sources of Income - The first step is to identify all possible sources of income. This can usually be achieved by using prior years statements. Categorize the income so that it works best for your organization. Typical income categories would include grants, donations and sponsors. Create a tab on your spreadsheet (usually tab 2) and label it Income;
B) Identify Expense Categories - Expenses do not typically change from year to year, however you have the luxury of breaking expenses down into minute detail if you wish. Once you have identified the individual categories of expenses, create a tab on your spreadsheet (usually tab 3) and label it Expenses;
C) Create Profit and Loss - Create a profit and loss statement (tab 1 of your spreadsheet) and put in your income and expense categories. Put in a forumula at the bottom of each that provides totals. Settin up the formulas for each category of income and expenses is as simple as selecting your + sign and going to the proper tab and selecting the total for each category;
D) Restricted Funds - Some non profit organizations receive funds that are designated to go to specific events. These can be categorized on both the income and expense tabs and a separate section may be set up on your profit and loss to ensure proper accounting.
Creating a working cash flow statement for a non profit is not difficult. In fact, anyone with basic knowledge can create a spreadsheet template that works for their organization. Non profit cash flow statements are critical to the success of non profit accounting and can help you see at a glance the financial health of your organization.