How to Streamline Nonprofit Financial Statement Preparation

Nonprofit financial statements are essential to proper financial planning and management. They help you manage risks and make well-informed financial decisions and strategic plans.

Additionally, YPTC encourages sharing your financial statements with external stakeholders such as donors, members, creditors, and the general public to provide transparency and accountability. This information allows stakeholders to assess your nonprofit’s performance and ability to continue to provide services.

However, with so many other tasks on your team’s plate, you’ll want to streamline the financial statement preparation process. This guide explores five tips for efficiently and effectively compiling nonprofit financial statements so you can spend more time on your mission.

Start by compiling all the data needed to complete your financial statements. Organizing this information from the get-go will save time otherwise spent tracking down different data points and sources.

Collect data from your:

• Accounting records, such as your general ledger and sub-ledgers
• Bank statements indicating your cash transactions and interest income
• Donation and grant records documenting funds received, plus any restrictions on their use
• Expense reports, including staff- and volunteer-incurred expenses, and invoices and receipts from vendors or service providers
• Budget documents showing historical data used to project revenues and expenses
• Payroll records indicating personnel expenses such as employee salaries, wages, benefits, and taxes
• Inventory records detailing donated goods, supplies, and other materials that you can use or sell

Assembling this pertinent information will not only help you compile your nonprofit financial statements, but it will also provide context for other documents and reports. For example, this data will be helpful when it’s time to create your annual report.

Once you’ve gathered your financial data, store it in a central location: accounting software. As Bloomerang’s nonprofit software guide explains, the right software platform will help nonprofits “manage their finances, including revenue, expenses, budgeting, grants, and other needs” and “maintain organized financial data to support their long-term viability and comply with relevant regulations.”

When choosing an accounting software solution, make sure to:

• Research the available nonprofit options. There are many accounting platforms out there, but you’ll want to select one that caters to your needs as a nonprofit. For instance, QuickBooks For Nonprofits allows you to categorize your revenue and expenditures by fund or program, track budgets, accept donations, create specialized reports, and more.
• Consider your budget. Many nonprofit-oriented platforms will offer discounts for charitable organizations. Determine how much you can allocate to an accounting platform, and compare prices.
• Explore reviews. Discover what other organizations have to say about the accounting solutions they use by researching your top options on software review sites like Capterra and G2. Seek out reviews from nonprofits of a similar size and type to yours.

For best results, your accounting software should integrate with your other software solutions. Check to see which platforms integrate with tools like your donor management system, constituent relationship management (CRM) platform, and payroll solution.

One of the keys to proper financial management is timeliness. When you have many internal and external deadlines to meet, staying organized is essential.

With a financial reporting calendar, you can keep your team on track and prepare your financial statements in an efficient manner. Mark important dates and checkpoints, such as:

• Monthly, quarterly, and annual financial reviews
• Annual budgeting timeline
• Grant application and reporting deadlines
• State and local tax filing deadlines
• Scheduled audits

Share this calendar with all stakeholders involved in the financial reporting process so everyone knows when they must finalize certain statements and documents. To streamline this process further, send reminders for upcoming deadlines and establish a check-in cadence. This way, you can get a sense of team member progress and offer extra support as needed to finish everything on time.

The more stakeholders involved in the financial statement preparation process, the better you’ll catch mistakes. Internal stakeholder reviews support accuracy, completeness, and alignment with your overarching goals.

The main parties who should review your nonprofit financial statements include your:

• Executive director or CEO. Your leadership team is heavily involved in developing your nonprofit’s annual budget. They create the budget with your organization’s current priorities and mission in mind to ensure your resource allocation reflects your goals.
• Finance committee. Since the finance committee specializes in financial oversight, it’s crucial to have them review your financial statements, as well as any other financial reports, for accuracy and completeness.
• Board. Your board of directors assists with your strategic plan, approves your annual budget, monitors your financial performance, and creates financial policies. Your financial statements provide essential information for the board to carry out these duties.

Having multiple stakeholders review your financial statements also leads to better financial decisions. When everyone is on the same page and understands your organization’s performance, they can execute their roles more effectively.

While the previous tips will help you streamline financial statement preparation, you may still feel overwhelmed by the process, especially given all the other nonprofit management tasks on your shoulders. Take the stress out of the process by outsourcing financial statement preparation to a nonprofit accounting firm. In addition to compiling nonprofit financial statements, they can also help you with:

• Reconciling accounts
• Preparing for audits
• Budgeting
• Managing grants
• Maintaining GAAP compliance

Although you could have an executive step into a finance role or hire a full-time accountant, outsourcing to a firm is often more affordable and ensures you work with experts in nonprofit finance. That way, you can focus more time on your mission and relax, knowing that your organization’s financial management is in good hands.

Financial statements are at the core of your financial management strategy. Streamlining the preparation of these documents will make the process more efficient and help you communicate crucial financial information to both internal and external stakeholders timely and effectively.

Jennifer Alleva is the Chief Executive Officer at Your Part-Time Controller, LLC (YPTC), a leading provider of nonprofit accounting services and #65 on Accounting Today’s list of Top 100 accounting firms. Jennifer brings over three decades of expertise in accounting and leadership to her role as CEO of YPTC.

When Jennifer joined YPTC in 2003, the firm consisted of just over 10 staff members. Since then, she has helped grow YPTC into one of the fastest-growing accounting firms in the country.

Jennifer’s accomplishments include her tenure as an adjunct professor at the University of Pennsylvania Fels Institute, her frequent speaking engagements on nonprofit financial management issues, her role as the founder of the Women in Nonprofit Leadership Conference in Philadelphia, and her launch of the Mission Business Podcast in 2021, which spotlights professionals and narratives from the nonprofit sector.