As board members and managers of nonprofit organizations, we are constantly reminded that we must be good stewards of the public trust, ensuring the resources of our organizations are well protecte
Whether your organization is large or small, effective financial management is an ongoing process featuring a cycle of good management habits. Sound procedures and internal controls help ensure accurate accounting and high-quality reporting. Evaluation of the information in the reports then facilitates good management decisions and informs both near- and long-term planning. Regular evaluation of the process leads to consistent improvement in financial management.
The Statement of Financial Position (SOFP) is the correct nonprofit term for the balance sheet. The concept and the equation are essentially the same as any business balance sheet or statement of personal net worth, with the key difference being that for nonprofits, what’s left when you subtract liabilities from assets is not considered “equity” belonging to an individual or a business, but rather “net assets” that remain with the nonprofit entity.
Selecting and calculating certain ratios and indicators, especially in trend, can tell an organization a lot about many aspects of its financial position, performance, and prospects.
