How to Use Accounting Software to Read Nonprofit Financial Statements

Capital Business Solutions is a leading provider of accounting software for non-profit organizations. As experts in the industry, we understand the unique financial needs and challenges faced by non-profits. Financial statements are crucial for any organization, but it can be challenging to interpret them, especially for those who are not trained in accounting. 

Our non-profit accounting software specialists are helping small business owners explore how to use accounting software to read and analyze nonprofit financial statements. By using accounting software to interpret financial statements, you can gain valuable insights into your organization’s financial health and make informed decisions to drive your mission forward. Whether you are a non-profit CFO, board member, or staff member, we are sharing practical tips and techniques to help you use accounting software to analyze financial statements effectively.

Understanding the Non-Profit Financial Statements of Your Organization

Financial statements are the primary means of communicating the financial health of an organization to its stakeholders. Nonprofit organizations are required to produce financial statements, which provide important information about the organization’s financial performance, position, and cash flows.

Statement of Financial Position (Balance Sheet)

The statement of financial position, commonly known as the balance sheet, is a snapshot of an organization’s financial position at a particular point in time. It lists the organization’s assets, liabilities, and net assets– also known as equity. The assets are what the organization owns, and the liabilities are what the organization owes. The net assets represent the residual interest of the organization after liabilities are deducted from its assets. The balance sheet provides an overview of the organization’s financial health, including its liquidity and solvency.

Statement of Activities (Income Statement)

The statement of activities, also known as the income statement, shows the organization’s revenues and expenses over a specified period. It provides information about the organization’s operating activities, such as program expenses and fundraising expenses, and its non-operating activities, such as investment income and gains/losses from the sale of assets. The statement of activities helps to determine whether the organization is operating at a surplus or a deficit.

Statement of Cash Flows

The statement of cash flows provides information about an organization’s cash inflows and outflows over a specified period. 

It is divided into these three sections: 

• Operating activities: The operating activities section shows the cash flows from the organization’s day-to-day operations, such as cash received from donations and payments made to suppliers. 
• Investing activities: The investing activities section shows the cash flows from the organization’s investments, such as the purchase or sale of investments. 
• Financing activities: The financing activities section shows the cash flows from the organization’s financing activities, such as the issuance of debt or the repayment of debt.

The statement of cash flows helps to assess an organization’s liquidity and cash position.

Explanation of Each Financial Statement

Understanding the importance of non-profit financial statements is crucial to understanding an organization’s financial health. The statement of financial position provides information about the organization’s assets, liabilities, and net assets. The statement of activities provides information about the organization’s revenue and expenses over a specified period, while the statement of cash flows shows the organization’s cash inflows and outflows over the same period. 

By analyzing each financial statement, stakeholders can determine an organization’s financial performance, position, and cash flows, which can help them make informed decisions for the organization.

Using Accounting Software to Read Financial Statements

Accounting software can help to streamline the process of generating and analyzing financial statements for nonprofit organizations. By using non-profit accounting software, stakeholders can access financial statements quickly and easily and gain insights into an organization’s financial health.

Overview of Accounting Software

Accounting software is a computer program designed to help organizations manage their financial transactions, bookkeeping, and reporting. Accounting software can range from basic applications to complex systems that integrate with other business applications.

Accessing Financial Statements in Accounting Software

To access financial statements in accounting software, users must first log in to the system. Depending on the software, users may have to navigate to a specific menu or module to access financial statements. Once users have accessed the financial statements, they can view them in various formats, such as PDF, Excel, or HTML.

Understanding the Layout of Financial Statements in Accounting Software

Accounting software may display financial statements differently from traditional paper-based statements. Users must understand how the software presents financial information to interpret the financial statements accurately. Users can also customize the software’s layout to suit their preferences or organizational requirements.

Tips for Using Non-Profit Accounting Software to Analyze Financial Statements

When using non-profit accounting software to analyze financial statements, users should ensure that the data is accurate and up-to-date. Users can use software features such as filters and drill-down capabilities to explore financial data in greater detail. Users should also be aware of the limitations of the software and seek additional assistance or advice from non-profit financial experts if needed. Finally, users can use the software to create charts or graphs to visualize the financial data, making it easier to understand and interpret.

Analyzing Non-Profit Financial Statements Using Accounting Software

Analyzing financial statements is an important task for nonprofit organizations to understand their financial performance, position, and cash flows. Accounting software can make this task more manageable and efficient.

Analyzing the Statement of Financial Position

Users can analyze the statement of financial position by comparing the organization’s assets to its liabilities and net assets. They can also analyze the composition of the assets and liabilities to determine the organization’s liquidity and solvency. Accounting software may provide features such as filters or sorting options that allow users to focus on specific categories of assets or liabilities.

Analyzing the Statement of Activities

Users can analyze the statement of activities by comparing the organization’s revenues and expenses over a specific period. They can also analyze the composition of the revenue and expenses to determine the organization’s financial sustainability and effectiveness. Accounting software may provide features such as pivot tables or charts that allow users to visualize the revenue and expenses in various ways.

Analyzing the Statement of Cash Flows

Users can analyze the statement of cash flows by examining the organization’s cash inflows and outflows over a specific period. They can also analyze the composition of the cash flows to determine the organization’s cash position and ability to generate cash. Accounting software may provide features such as trend analysis or forecasting that allow users to predict future cash flows based on past data.

Tips for Interpreting Financial Ratios

Financial ratios are useful tools for analyzing nonprofit financial statements. Users can calculate financial ratios using data from the financial statements and use them to measure an organization’s financial health. Non-profit accounting software may provide features that automate the calculation of financial ratios, making the analysis process faster and more accurate. Users should also compare the financial ratios to industry benchmarks or past performance to gain a better understanding of the organization’s financial position.

How Capital Business Solutions Can Help

At Capital Business Solutions, our software solutions can help you read and analyze financial statements more efficiently and accurately. Let’s explore the many ways our non-profit accounting software experts can help your non-profit organization. 

Streamlined Financial Statement Generation

Our software solutions make it easy to generate financial statements quickly and accurately. With just a few clicks, you can access your organization’s financial information and create financial statements in various formats, such as PDF, Excel, or HTML.

Customizable Financial Statement Layout

Our non-profit software solutions offer customizable financial statement layouts, so you can view financial information in a way that best suits your needs. You can also create custom financial statement templates that adhere to your organization’s reporting requirements.

Automated Financial Analysis

Our software solutions offer automated financial analysis features that allow you to analyze financial statements more efficiently. You can use features such as pivot tables, filters, and charts to explore financial information in greater detail, making it easier to identify trends and patterns in your organization’s financial performance.

Financial Ratio Analysis

Our software solutions offer financial ratio analysis tools that allow you to measure your organization’s financial performance and compare it to industry benchmarks or past performance. You can also create custom financial ratios and track them over time to gauge your organization’s financial health.

Training and Support

We offer non-profit software training and support to ensure that you can use our software solutions to their fullest potential. Our team of experts can provide one-on-one training sessions and ongoing support to help you navigate the software and troubleshoot any issues that may arise.

Contact Capital Business Solutions for Non-Profit Accounting Software Services Today! 

At Capital Business Solutions, we specialize in providing accounting software solutions for nonprofit organizations. Our software solutions are designed to help organizations manage their financial transactions, recordkeeping, and reporting efficiently. We also offer training and support to ensure that our clients can use our software to its fullest potential.

In today’s rapidly changing financial landscape, it is more important than ever for nonprofit organizations to have the tools and resources they need to succeed. We invite you to explore our accounting software solutions and see how they can benefit your non-profit organization. 

Contact us today by calling us at  (843) 971-9061 to learn more about how we can help you use accounting software to analyze your nonprofit financial statements and achieve your mission. Additionally, you can fill out our online contact form below to get started.