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Statement of Financial Position vs. Statement of Activities

best practices board finances reporting Apr 25, 2024

     I often talk about the two most common financials of a nonprofit- the Statement of Financial Position and the Statement of Activities. Well, those two terms can be easily confused since they sort of sound alike. So today, I'm going to share a helpful way of remembering these two common reports. 

     Keep in mind that these two basic nonprofit reports actually have for-profit equivalents that go by other names. In the for-profit world, these are called a Balance Sheet an Income Statement. But in a nonprofit, they're called a Statement of Financial Position and a Statement of Activities. Today I'm sharing some helpful tips on how to remember these two reports. 

Statement of Financial Position

     The Statement of Financial Position is like a comprehensive health checkup for the nonprofit. So think about going to the doctor and getting a physical. It’s a series of measurements and assessments that summarize your overall health at a given moment. Similarly, the Statement of Financial position is like a snapshot capturing the organization’s financial health metrics at a given point in time. It gives you a detailed assessment of your current assets (what you own) your current liabilities (what you owe) and your net asset position. So this report measures your overall financial condition in the same way a wellness exam records your vital signs and physical health. So when you think of the Statement of Financial Position remember that “P” in the word “position” stands for a “point in time.”

Statement of Activities

     The next basic financial report in every nonprofit is the Statement of Activities. Rather than an overall health checkup, this report is analogous to an activity tracker recording the daily activities and lifestyle choices that you're making as an individual to eventually improve your health over time. It documents the inflows and the outflows of financial resources in a nonprofit, like an individual might monitor their food or exercise. It’s a more granular record of the day to day habits that will eventually impact your financial goals. So, when you think of the Statement of Activities, think “daily activity tracker.” 

     I hope these analogies give you a clearer distinction between those two reports and help you better understand your organization’s financials in the future. If you’d like to speak one-on-one about your nonprofit’s financials or if you have specific questions related to finance in your organization, I’m here to help! You can book a strategic consult with me here. I look forward to serving you! 

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