How Your Nonprofit Financial Statements Can Get Help from a Line of Credit
In the nonprofit world, there are many things that are out of your control. You can’t help it if lousy weather affects attendance at an event or an economic downturn decreases donations. Still, there are other things you do have power over, such as getting help for your nonprofit financial statements with a line of credit.
Knowing where help will do the most good is essential. This is true whether you are talking about caring for the less fortunate or getting help for your nonprofit financial statements. Learn more about what a line of credit can do for your nonprofit organization to make the right decisions for your business.
What Everyone Needs to Know about Nonprofit Financial Statements
While nonprofit businesses are, first and foremost, a business, there are some very important differences between 501c3 organizations and for profit companies. One of the most vital is nonprofit financial statements.
These are sometimes given the term statement of financial activities or income statement. A nonprofit financial statement is simply a report of the expenses and income of a nonprofit for a set period of time. It is similar to the balance sheets of the for profit world. However, when it comes to getting help in this area, it can often be complex and problematic.
Your nonprofit financial statements help everyone get a better understanding of what’s going on financially at your organization. It should help to answer questions like, “Will you end the year in the negative or positive?” and “What is the status of our restricted revenue?”
What Should be in Your Nonprofit Financial Statements
Nonprofit financial statements record various values that are unique to nonprofits. For example, you may also create a statement of financial position, which denotes net assets that have temporary restrictions, permanent restrictions or no restrictions at all. This is necessary because, in not for profit financing, money often comes in with limitations on how you can spend it. That’s a situation that is practically nonexistent at for profit businesses.
Many nonprofits also produce a statement of activities. This is like the equivalent of a for profit income statement. In this document, you can reflect any changes to assets that previously had restrictions but don’t anymore. Your accountant may record the release of these revenues from whatever donor restrictions they were under, which happens after you incur expenses. It shows a positive and negative adjustment in each net asset fund.
Perhaps your nonprofit also creates a statement of cash flow as well. This highlights how much cash comes in and out your doors. You might also utilize a statement of functional expenses. In this report, you can distinguish program services or direct costs, which relate specifically back to your mission and support services, which usually falls under the classification of overhead.
This is unlike a balance sheet, which just lists assets and debt. When your nonprofit financial statements are in order, you can focus on growing your business.
The Importance of Nonprofit Financial Statements
If you plan on being in business for the long term and having an impact, your organization needs at least some of these statements. In fact, the Financial Accounting Standards Board recently made updates to its rules for nonprofit statement presentations. The purpose is to provide better information to everyone who has to read these statements. This includes donors, creditors and foundations.
All of these different statements have a clear connection to each other and gives some insight your business practices. Effective nonprofit financial statements show how your organization makes the best use of its resources on the way to accomplishing your mission. Overall, it will help you determine how your activities, revenue and projections compare to the budget you approve each year.
These reports are very important because they allow you to tell your story through your financial statements. With so much importance, its vital to pay close attention to these documents. As director or CEO, you must see the big picture and make smart decisions for the future of your business. For best results and comprehension, you should strive to keep it at one page.
The Difficulties of Nonprofit Financial Statements?
Although nonprofit financial statements are an essential part of your industry, we realize that there is more to the story of your organization than numbers and spreadsheets. For instance, we know you must do increasingly more with less, that it’s a struggle to win nonprofit grants and that it has always been hard for nonprofit to get a line of credit from a bank.
Financing Solutions (www.financingsolutionsnow.com) recognizes your challenges and we set a plan in motion to do something about it. That’s why we have a specific line of credit (LOC) program for nonprofits.
We know that often banks look at a nonprofit financial statements the same way they would with a for profit business. This is because most banks don’t understand nonprofit financials.
Financing Solutions is the number one provider of LOCs to nonprofits. Our LOC requires no personal collateral. It is easy to get in place and there is no charge until you use the line. The line is inexpensive if used for short term business funding issues.
The nonprofits that work with us are consistently happy with our line of credit product. As a result, Financing Solutions has an A+ with the BBB, which isn’t easy to get. It means that we never have any complaints.
How Can a Line of Credit Help
Managing partner Stephen Halasnik states that, “Many of our nonprofit clients thank us every day for their LOC.”
Most nonprofits are extremely responsible and use their LOC really wisely. They never use line if funds are not on the way. For funds or grants that are simply slow to arrive, getting a nonprofit LOC makes terrific sense.
In the past, many nonprofits would delay payroll if funds or grants were lagging behind bills. Most don’t know that delaying payroll is illegal according to IRS and state government rules. This typically results in penalties and extra scrutiny.
You can avoid all this with a not for profit line of credit. When you have one in place, it allows you to handle uneven cash flow, delays in government checks and any emergency that may arise.
With a LOC, you always have a supply of cash you can draw on to manage your daily expenses. This includes things like making payroll, fixing equipment and paying vendors early so you can start programs on time.
Ways to Improve Your Nonprofit Financial Statements
These days, everyone seems to be watching nonprofits. From the government to grant and loan providers and even the media, nonprofit finances are under a microscope like never before.
To make things worse, your resources and manpower are already at a breaking point. Therefore, having to deal with all this extra scrutiny is a big challenge. It may help to ensure that your nonprofit financial statements gives as complete a picture as possible. This will help to reduce the amount of follow up questions you have to answer.
Review them often – are you currently using the formats that best describes your organization? How many statements do you use? If there are not enough, important details and numbers might fall through the cracks. Producing too many will cause everyone’s eyes to glaze over from excessive or redundant information. You may want to include a brief narrative statement to help people keep up.
Look over your classifications – things don’t always happen fast in nonprofit organizations but changes do occur. Activities and functions may shift over time. Make sure you detail everything as necessary and record them properly.
Choose how to present your information – do you really need a statement of activities? Should you add a statement of cash flow if you don’t have one already? You may be dealing with an audience that doesn’t truly understand the functional expense line item. Take note of who is reading your financial statements. Then, make sure you are giving them the exact information they are looking for.
Invest in time saving techniques and tools – there’s lots of information that needs to be input into accounting systems. However, it’s the only way to get an accurate picture of what’s going on financially. Find software programs that may streamline this process.
Get a line of credit to help – constantly moving money around to cover cash shortages is time consuming and stressful. Instead, get the money you need for emergency nonprofit funding so that you can always take care of your expenses.
Where is the Best Place to Go for a Nonprofit Line of Credit
If your nonprofit would like a line of credit that you can use when cash flow is down please visit www.fscreditline.com/np to learn more, to apply and to receive a written offer. A Line of Credit for your nonprofit costs zero to set up and zero until you use it. This makes it an excellent backup plan.
To get a written quote in writing just fill out the form at the top and we will send you a non obligation written quote