Nonprofit financial statements: How to use them (Free template!)

In a recent Givebutter survey, nearly 1 in 5 nonprofit professionals said they don't regularly review financial statements.

Nonprofit financial statements provide the data needed to complete your Form 990 accurately, but they also tell a much bigger story about the financial health of your organization and help you make smarter decisions for the future.

Financial statements are sometimes created and shared without being fully explored for what they can reveal. If you're not sure what to look for or how to use them in practice, you're not alone. Once you know what to focus on, they become one of the most valuable tools for guiding your organization's direction.

In this guide, we'll explore the different types of financial statements, how to prepare and analyze them, and examples of what they look like in practice.

Key takeaways

• Financial statements are a must-have ✔️ They're required for filing your Form 990 and for financial audits.
• There are four main statement types 📝 Each statement shows financial data in a different way and should be reviewed together.
• Go beyond the numbers 📊 Analyze your data to identify opportunities and risks, and share those insights with your board.
• Get a clearer financial picture 🧈 See all your in-platform donations with Givebutter Wallet, or use our QuickBooks integration to streamline donation tracking and reporting.

Download your free nonprofit financial statements template

Before we run through the details, download this free nonprofit financial statement template. It's a practical companion you can use alongside this guide or when preparing future statements.

Your free template includes:

• Templates for the four main statements
• Sample nonprofit financial statements
• Helpful notes and guidance

Freebie alert!

Download your free nonprofit financial statements template →

What are the 4 basic financial statements for a nonprofit?

Nonprofits rely on four core financial statements to understand their financial health and make more informed decisions. Each presents a different perspective, so it's best to view them together for a full financial picture.

Many of these reports, like the statement of functional expenses, are also required for audits and compliance.

1. Statement of financial position 💲

A nonprofit statement of financial position (also known as a balance sheet) shows your organization's assets, liabilities, and net assets at a specific point in time.

A balance sheet includes:

• Assets: Everything your nonprofit organization owns, including cash, accounts receivable, and physical assets like buildings and equipment.
• Liabilities: Anything that your nonprofit owes, including accounts payable, debt, and other financial obligations like leases or contract agreements.
• Net assets: The difference between your assets and liabilities, representing the funds available once liabilities are settled. This figure is typically divided into restricted and unrestricted categories.
• Total liabilities and net assets: The combined total of your liabilities and net assets.

Your balance sheet gives board members (and auditors) a quick snapshot of your organization's financial health.

💡 Pro tip: List cash as your first asset, even if it isn't the largest figure. This helps highlight what's immediately available versus what may only become available if you sell.

Dive deeper

Learn how to read your nonprofit balance sheet →

2. Statement of activities 💰

A nonprofit statement of activities (also known as an income statement) provides details on revenue and expenses, including whether funds are restricted or unrestricted.

Your statement of activities should include:

• Revenue: All the money coming into your nonprofit organization, such as donations, grants, and membership dues.
• Expenses: Your nonprofit's spending grouped by function, such as program costs and administrative expenses.
• Net assets: The figure that remains when you subtract total expenses from total revenue.

This statement helps you understand how your organization is performing financially and whether you need to fill any gaps.

Dive deeper

What is fund accounting & why it matters →

3. Statement of cash flows for nonprofits 📊

A statement of cash flows shows how funds move in and out of your nonprofit organization over time.

Your statement of cash flows should include:

• Operating activities: Revenue and expenses from day-to-day operations, including donations, grants, payroll, and fundraising costs.
• Investing activities: Purchases or sales of long-term assets, like buildings, equipment, and investments.
• Financing activities: Long-term financial liabilities, such as loan repayments and endowments.

Reviewing your cash flow statement regularly helps you spot trends, plan ahead, and ensure you have enough funds to cover upcoming expenses.

4. Statement of functional expenses 💸

A statement of functional expenses breaks down your organization's costs by purpose, making it easier to understand how funds supported your mission. This report is required under GAAP for certain nonprofits (such as voluntary health and welfare organizations), but it's a useful document for all nonprofits.

Your statement of functional expenses should include:

• Program costs: Expenses directly tied to your mission, like services or program materials.
• Administrative costs: Day-to-day operational expenses, such as salaries, rent, utilities, and office supplies.
• Fundraising costs: Expenses related to fundraising efforts, including marketing and events.

This statement is required for certain nonprofit audits and is often included with Form 990. It also helps demonstrate how you allocate the funds you receive.

💡 Pro tip: Most of your expenses should support programs. If your administrative or fundraising costs are high, look for ways to streamline operations or improve efficiency.

Learn more

Get your free nonprofit accounting cheat sheet →

How to prepare financial statements for nonprofit organizations

While for-profit statements focus on profitability, nonprofit statements prioritize mission-driven resource use, liquidity, and stewardship.

Preparing accurate financial statements isn't just about reporting numbers, but also about understanding the impact those numbers represent and using that information to guide decisions.

Who prepares nonprofit financial statements? 🕵️

In a Givebutter survey of 80+ nonprofit professionals, 52% said financial statements are prepared by internal staff, while others rely on outside support or volunteers.

In larger nonprofits, external auditors typically review and verify statements prepared by internal finance teams. Smaller organizations typically rely on a chief financial officer (CFO) or a senior finance officer to manage this process.

How often should nonprofits prepare financial statements? 📆

In our survey, only 50% of nonprofits review financials monthly, while nearly 14% don't have a formal review process at all.

Nonprofits should prepare financial statements annually, typically in alignment with the fiscal year. However, it's best practice to prepare monthly financial statements to monitor performance, identify trends, and maintain healthy cash flow.

Regular review helps you stay ahead of trends and make proactive decisions.

More to explore

Get the complete guide to nonprofit financial management →

How to ensure accuracy in nonprofit financial statements? 🔎

Accurate financial statements start with clean, organized data. To streamline the process and reduce errors, use tools like QuickBooks or Givebutter's donation tracker software. Both help you centralize your data, reduce manual entry, and make it easier to generate reliable financial reports.

More to explore

Discover the best accounting software for nonprofits →

How to analyze your nonprofit financial statements

In our survey, many nonprofit professionals said they struggle with concepts like restricted vs. unrestricted funds and cash flow vs. revenue.

Nonprofit financial statement analysis is less about individual numbers and more about understanding patterns, sustainability, and relationships over time. Leaders and board members should look beyond a simple surplus and assess whether the organization is financially stable and positioned to sustain its mission.

Here's what to focus on as you review your financial statements.

1. Look at trends over time—not just one period 📈

Reviewing a single month or year provides a snapshot, but real insight comes from comparing results over time.

Patterns to monitor include:

• Increases or decreases in revenue and expenses
• Spread of income from different funding sources
• Cash flow consistency
• Growth of liabilities

Looking at trends helps you spot growth or decline, identify risks, and catch early warning signs of potential problems.

2. Connect the statements to see the full picture 🧩

Reviewing all your financial statements together helps you understand your organization's overall financial health. The real insight comes from comparing them to answer key financial questions like:

• Statement of activities: Did you operate at a surplus or a deficit?
• Statement of cash flows: Did that surplus translate into actual cash?
• Statement of financial position: What was the impact on reserves and obligations?
• Statement of functional expenses: How much did you spend on programs vs. overhead?

Reviewing statements in isolation can create a misleading picture of your financial health. You need to look at the whole picture before you commit.

3. Watch for common financial signals & red flags 🚩

Even financially strong nonprofits can run into issues without regularly monitoring. Avoid potential setbacks by knowing what to look for and how to respond.

Common red flags include:

• Limited cash on hand: Having all your assets tied up or a lack of incoming cash can impact your ability to run programs. Look for ways to increase flexible funding.
• Dependence on one funder: Relying heavily on a single nonprofit funding source can create risk if that funding changes. Increase stability by seeking new donors and sponsors or applying for new grants.
• Expenses outpacing revenue: If your expenses are rising faster than your revenue, evaluate spending or identify new income opportunities.
• Persistent deficits: Shrinking net assets or persistent debt can signal long-term instability. Stabilize the situation by seeking funding sources or lines of credit, or by negotiating the terms of any repayments.
• Imbalanced costs: Many funders and evaluators consider a 65/35 program-to-overhead ratio a healthy benchmark. If your administrative or fundraising costs are too high relative to programs, it's time to reassess your spending priorities.

Monitor these financial signals regularly so you can respond before a small issue becomes a larger problem.

4. Translate numbers into board-level insights 💼

Financial statements provide data, but your board members need clear insights to make the right decisions.

Translate financial signals into practical takeaways like:

• Program expenses are lower than program revenue → This program is financially sustainable.
• Cash flow is positive and increasing → We have the capacity to invest in new opportunities.
• Program expenses are rising while revenue is declining → This program may not be sustainable and needs to be evaluated.
• A large share of revenue comes from one source → We should prioritize diversifying our funding.
• Restricted net assets are growing → We need to consider how this affects day-to-day operations.
• A high percentage of assets are non-cash → We should discuss releasing long-term assets to improve liquidity.

Adding context to the numbers helps your board make informed, strategic decisions.

Freebie alert!

Download your free nonprofit treasurer report template →

See it in practice: Sample nonprofit financial statements

To help you illustrate these example nonprofit financial statements, we'd like to introduce you to our fictional nonprofit, Butter Community Kitchen:

Butter Community Kitchen is a small nonprofit based in New York. Its mission is to feed the city's residents, one free meal at a time. The organization has been operating for two years, with a team of 20 staff members and a community of 50 volunteers.

Most of its funding comes from individual donors and event ticket sales, along with a smaller portion from corporate sponsorships and grants.

Here's what Butter Community Kitchen's financial position looks like, and how its finance officers and board members might interpret what the data shows.

1. Sample statement of financial position 💲

Butter Community Kitchen's balance sheet shows a healthy financial position.

Liabilities represent just 28% of total assets, well within a sustainable range, and the majority of net assets are unrestricted, giving the organization flexibility to allocate funds where they're most needed. Cash reserves have grown year over year, which is a positive sign for a nonprofit in its second year of operations.

2. Sample statement of activities 💰

This fictional nonprofit's statement of activities shows a balanced revenue mix with opportunities for growth.

Butter Community Kitchen could expand its membership program—currently just 4% of total revenue at $8K—or host larger fundraising events to attract major donors. The distribution between program, administrative, and fundraising expenses appears reasonable, with a strong emphasis on program spending.

3. Sample statement of cash flows 📊

Butter Community Kitchen's cash position grew by $13K this year, ending at $85K.

It's worth noting that operating activities show a net cash outflow of ($7K), which is common for small nonprofits where cash from donations arrives on a different timeline than expenses are paid. This is why reviewing the cash flow statement alongside the statement of activities gives a much fuller picture than either statement alone.

4. Sample statement of functional expenses 💸

Butter Community Kitchen's statement of functional expenses shows that most spending is directed toward program activities, with salaries and benefits making up the largest share across all categories. There may be opportunities to reduce overhead in areas like rent, utilities, and subscriptions, but overall, this statement indicates positive missional alignment.

Find more financial transparency with Givebutter

Nonprofit financial statements are more than just a compliance requirement—they're essential tools for transparency, decision-making, and long-term sustainability. The organizations that get the most out of financial statements review them regularly, share insights with their board, and use the data to guide smarter decisions about programs, spending, and growth.

Sign up for Givebutter today to gain a clearer view of your finances and impact.

FAQs about financial statements for nonprofits

Does a 501(c)(3) have to provide financial statements?

Yes, 501(c)(3) nonprofit organizations are required to submit financial statements to the IRS every year through Form 990. They're also required to provide a copy of this completed form to anyone who requests it.

Are nonprofit financial statements public?

Nonprofits must make their Form 990 (and any attached audited financials) publicly available, but internal financial statements don't have to be shared unless required by funders or regulators.

Can you request financial statements from a nonprofit?

Yes. You can request financial statements directly from a nonprofit. Many organizations also publish them online for easier access.

Where to find nonprofit financial statements & Form 990s?

You can find a nonprofit's Form 990 using the IRS's tax-exempt organization search or platforms like Candid.

How to read nonprofit financial statements?

Start with the statement of financial position to understand your assets, liabilities, and net assets. Then review the statement of activities to see revenue and expenses, the statement of cash flows to track actual cash movement, and the statement of functional expenses to understand how costs are allocated across programs and overhead. Together, these four statements give you a complete view of your organization's financial health.