What is a Statement of Financial Position in a Nonprofit?

One of the most important financial statements for a nonprofit organization is the statement of financial position. The statement of financial position, also known as a balance sheet, is a statement that details the assets, liabilities, and net assets of your nonprofit.

The statement of financial position serves as one of the four statements that your organization should pay close attention to and ensure that only accurate information is recorded – the same attention should be dedicated to the statement of functional expenses and your statement of activities.

For today, we’re going to take a look at what a statement of financial position is, why you’re required to have one in a nonprofit, and how to make managing your nonprofit’s finances easier:

What is a Nonprofit Statement of Financial Position?

A nonprofit statement of financial position provides a quick look at your organization’s financial position at a specific point in time. This statement, or balance sheet, is essential as it allows your nonprofit to track three main things such as:

• Assets
• Liabilities
• Net Assets

These are the resources that your organization owns or controls, including cash, investments, property, and equipment, along with your financial obligations and the difference between the two.

Your statement of financial position should provide insight into your organization’s liquidity or ability to meet its financial obligations. Additionally, you should be able to see your organization’s equity or net worth clearly.

Why Your Nonprofit Should Have a Statement of Financial Position

Whether legally required or simply required for good business practice, most financial statements serve the same purpose – to make educated decisions about the organization and to be transparent about their financial health. 

A statement of financial position serves to help nonprofits track and manage their finances and to provide transparency and accountability to donors, grantors, and stakeholders. This information helps nonprofits make informed decisions regarding the use of resources and financial management strategies.

As a nonprofit leader, a statement of financial position can help you monitor your organization’s financial health and help you navigate and prepare for periods of high or low donations. You’ll also gain insight that can help you meet financial goals and objectives.

How to Make Managing Your Nonprofit’s Finances Easier

Not keeping your financial statements up to date (and accurate) can lead to huge ramifications, both financially and legally. One way you can mitigate this risk is to create SOPs for your finance team to follow. SOPs for common financial processes and procedures can reduce errors, increase efficiency, and maintain a smooth workflow. 

Another way to make managing your finances easier is to take preventative action against fraud and cyber-attacks. Nonprofits are at risk, more so than traditional small businesses when it comes to online security.

But, if managing these aspects of your nonprofit’s finances feels intimidating or you simply don’t know where to start, connect with us today at ModVentures. We’ll have a quick consultation about what’s best for your organization.