by Kassie Davis

An organization’s financial statements provide an overview of the general financial health of an association at any given time of the year. Financial statements provide updated summaries for the previous month and year-to-date progress and can be used to compare your current position vs.  where you ended in the previous year.

There are two main components of an organization’s financial statements: the Balance Sheet and Income Statement (sometimes referred to as the Profit & Loss Statement). Depending on the size of the organization, you may also have supplemental schedules, which allow you to further breakdown financials from the Income Statement in greater detail.

Let’s break down each component and show how certain aspects can be presented in a more visual, easily digestible format using dashboards.

Balance Sheet 101

The Balance Sheet provides a detailed report of an organization’s Assets, Liabilities and Net Assets.

Assets are what your organization owns that carries value, typically cash in the bank and balance(s) in your investment accounts.  Also recorded in the Assets section are:

  • Accounts Receivables (AR) – amounts owed to the organization. Example: Open sponsor invoices
  • Prepaid Expenses – this type of asset occurs when an organization pays for goods and services to be received in the future. Example: Conference hotel deposits

Liabilities are amounts that your organization owes to others. There are two types:

  • Deferred Income/Deferred Revenue – payments an organization receives for products or services to be received in the future. Example: Member dues paid now for the next fiscal year (FY)
  • Accounts Payable – items recorded as an expense that have not yet been paid. Example: Credit card balances

Net Assets are total assets, minus total liabilities and are representative of the net worth of the organization. Net assets are comprised of:

  • Unrestricted Net Assets – this is the cumulative net income/loss from the inception of the organization through the end of the last FY.
  • Designated Net Assets – funds that are held for a specific purpose as a result of internal decisions from the board, released either by purpose or time.
  • Restricted Net Assets – funds that are held for a specific purpose as a result of restrictions placed by external parties (donors/grantors).

Income Statement 101

The Income Statement reports how much revenue your organization earned over a specific time period. This usually includes the past month, year-to-date up to the end of the previous month, the current FY budget and overall performance of the past FY.

The Income Statement also shows the costs associated with earning that revenue. The literal “bottom line” of the Income Statement shows the association’s net earnings or loss for the period.

Reading Income Statements Top to Bottom

  • Time Period – month and position in the FY, i.e. 3 Months Ended 3/31/21 or Year Ending 12/31/21
  • DRAFT – identified as draft until the FY is closed, typically once an audit is performed or the tax return is filed
  • Income/Revenue – total amount of money brought in from sales of products or services during the period
  • Expenses/Costs – total amount of money paid out during the period
  • Profit (or Loss)
    • Net Revenue Before Net Unrealized Gain/Loss: income before taking the unrealized gain/loss into account
    • Unrealized Gain (Loss): An unrealized gain/loss is a potential profit/loss that exists on paper, resulting from the increases or decreases in the value of an investment. It will remain unrealized until the investment is sold.
    • Net Revenue or Net Income Over (Under Expenses): The bottom line. This shows the net amount of money an organization earned or lost in total during the defined period.
  • Supplemental Schedule(s) – detailed breakout of the income and expenses for a specific category or function of the organization. Examples include Annual Conference, Newsletter, Advocacy, etc. Income and expenses with supplemental detail found on supplemental schedules are denoted on the first page of the Income Statement with an asterisk (*) following the line-item title.
  • Footnotes – notes found at the bottom of the page with additional details

Reading Income Statements Left to Right

  • Categories – types or classifications of income and expenses
  • Current Month – one (1) month of income and expenses/the reporting month
  • YTD – year-to-date income and expenses for the current FY
  • Current Year Budget – total income and expenses budgeted for the current FY
  • YTD Actual vs Budget Variance – this column shows whether you are under or over budget. Amounts in parentheses indicate under budget for that reporting period; likewise, no parentheses indicates over budget.
  • Prior Year Actuals – total income and expenses for the previous FY

Using Dashboards to Present Revenues to Your Board

Now that you have a better understanding of your association’s financial statements it may be worthwhile to take that data and present it in a more digestible, visual dashboard format.

Ultimately, it is at your discretion how best to present financial data to the board; some organizations may prefer reviewing the standard financial statements. In this case, using the visual representations can be added as a supplement to your financial statements, which may result in a greater comprehension of the organization’s total financial picture.

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