Nonprofit Accounting 101

Numbers. Spreadsheets. Budgets. Ugh. For many of us passionate about our causes, the financial side of running a nonprofit can feel overwhelming. But fear not! Financial literacy is a critical skill for any nonprofit leader, and understanding the basics of nonprofit finance and accounting doesn't have to be scary.

In this edition of Nonprofit Hustle, we're diving into Nonprofit Accounting 101. We'll break down the essential concepts you need to know to manage your organization's finances effectively. So, whether you're a board member, executive director, or just starting out, this is for you!

• 🧮 The Nonprofit Accounting Equation

• 💰 Fund Your Passion: Unveiling Nonprofit Revenue …

• 🛑 Understanding Restricted vs. Unrestricted Fundi …

• 💸 Budgeting Basics: From Cash Flow to Creating Yo …

• 📈 Financial Statements Demystified: Telling Your …

• 🔎 Safeguarding Your Success: The Power of Interna …

• 💻 Resources for Further Learning

🧮 The Nonprofit Accounting Equation

Ever heard the saying "what gets measured, gets managed"? Well, the same goes for your nonprofit's finances! The foundation of understanding your organization's financial health lies in the nonprofit accounting equation.

This equation might seem intimidating at first, but it's actually quite simple:

Assets - Liabilities = Net Assets

Here's a breakdown of what each part means:

• Assets: These are the resources your nonprofit owns or controls, like cash in the bank, investment accounts, prepaid expenses, office equipment, and buildings. Think of them as the things you have to carry out your mission.

• Liabilities: These are your organization's debts – the money you owe to others, such as unpaid bills, credit cards, or outstanding loans.

• Net Assets: This represents the difference between what you own (assets) and what you owe (liabilities). There are two types of net assets: net assets WITH donor restrictions (AKA restricted net assets) and net assets WITHOUT donor restrictions (AKA unrestricted net assets). We talk more about restricted vs. unrestricted funding later. But for now, know that net assets essentially show the financial well-being of your nonprofit.

Why is this equation important?

The nonprofit accounting equation provides a snapshot of your organization's financial position at any given time. It helps you track progress toward your goals, assess your ability to cover expenses, and make informed decisions about resource allocation.

💰 Fund Your Passion: Unveiling Nonprofit Revenue Streams

Running a nonprofit isn't just about passion — it takes resources to make your mission a reality. However, unlike for-profit businesses, nonprofits have diverse income sources to fuel their work. Here's a glimpse into the different ways you can fund your passion and keep your organization thriving: