Ready for your close-up? —your nonprofit’s year-end snapshot

Joan M. Renner, CPA, CGMA, Director 501(c)(fit!)

Remember the last time you updated your professional photo?  Most of us have a picture that we use on our website and our bio.  I bet you put some thought into looking your best on picture day.

Well, for your nonprofit, the last day of your fiscal year is financial picture day.  Your balance sheet on that day is a snapshot of your financial position, and you’re going to have to live with that snapshot for the rest of the year. 

As if that’s not enough, the new financial reporting GAAP will require nonprofits to disclose details about their financial assets available at year-end.  This new footnote brings your snapshot into high-def. 

As your year-end approaches, what should you consider to help your nonprofit look its best? 

  • Document promises to give. Nonprofits record contributions as income on the date promised.  If a donor promises unconditionally before year-end, you can count that pledge as income.  This is a good time to document any intentions that are a little vague. 
  • Keep cash balances in the black. A negative cash balance on the last day of your year will show up on your balance sheet as a “cash overdraft”.  On the accrual basis of accounting, all your expenses will be counted in the right year, whether or not you write the check.  Don’t overdraw your checking accounts by writing too many checks at year end. 
  • Collect future money. Between now and year-end, try to collect outstanding receivables.  Also, try to collect money from sponsors of future events by offering some advance recognition.  The more you can collect by year-end, the better your bank balance will look.
  • Keep accounts payable within 30 days. A spike in the accounts payable balance might make people wonder why you’re not paying your bills.  Don’t ignore your normal check writing cycle at year-end.
  • Keep restricted funds restricted. Nonprofits separate their equity, or net assets, between net assets with donor restrictions and net assets without donor restrictions.  A deficit in unrestricted net assets implies that you borrowed from restricted net assets to make ends meet.  Even if you didn’t actually use restricted cash, a shortfall in your general fund will make it look as though you did.  Major hint:  if you’re in this position, you need some unrestricted pledges fast.  See if one or more of your best donors will agree to make a promise before year-end.

What else can you do?

Learn more about the rules for nonprofit income recognition to help you understand how contributions and grants affect your financial statements.  We have helpful information about nonprofit accounting principles in our upcoming seminar, Financial Leadership Training for Emerging Nonprofit Professionals.

Draft your assets available footnote that will be required by the new GAAP for nonprofit financial reporting.  Don’t wait till after your year is over.  We’ve included a basic session on the new nonprofit GAAP, Remodeling Your Financials—how new financial reporting GAAP will affect YOU!   as part of our emerging leaders seminar, Financial Leadership Training for Emerging Nonprofit Professionals 

If you’re the person in your organization in charge of implementing the new GAAP for nonprofit financial reporting, you need to know more details.  To help you prepare, we have a one-day in-depth session, Financial Intensive Training on the New Financial Reporting GAAP—Remodel Your Financials—an in-depth look

Nonprofit GAAP is your language–and very little of it is taught in business school.  Join us soon and build your professional power at 501(c)(fit!).

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