Lesson 5 – Tracking revenue and expenses

Two of the most insightful reports include the statement of financial position (balance sheet) and statement of activities (income statement). A statement of financial position shows what an organization owns, what their liabilities are and their net assets (net worth). A statement of activities shows an organization’s revenue, expenses, and excess or deficiency of revenue over expenses.

For a nonprofit, the income statement must be broken down into two areas and within those areas, three main categories. First, revenue must be categorized as either Undesignated or Designated, then expenses must be classified as either Program Services, Management and General and Fundraising. This helps determine the feasibility of you financial plan by measuring whether or not you have the resources (revenue) available to cover your expenses to operate your organization and run your programs.

In order to generate specific reports, it is important to include the following practices:

• Budgeting – Essential for all planning.
• Program Costs – Having an understanding of the actual costs of programs.
• Diverse Funding Sources – Creating a revenue stream from various sources, including donations, fund raising event revenue, program services and grants.
• Functional Accounting – Tracking expenses for program services and management and general and fundraising.
• Cash Flow – Monitoring for daily cash for day to day expenses.
• Accountability and Transparency – Demonstrating how funds are received and used.