Nonprofit Accounting Basics

Financial Management

Program Costs to Earned Revenue Ratio

This ratio calculates the portion of program expenses that is covered by related program revenue.

Ratio: Months Cash on Hand

This ratio tells you whether the organization has sufficient cash resources to deliver its mission and pay its obligations on a timely basis. How long could the bills be paid with no new cash?

Ratios and Indicators for Small and Midsize Organizations

Selecting and calculating certain ratios and indicators, especially in trend, can tell an organization a lot about many aspects of its financial position, performance, and prospects.

Ratios: Current Ratio

This ratio tells you how many times current (within 12 months) assets could cover current liabilities. A value of 1 or better indicates that current liabilities could be covered by current assets.

Ratios: Net Working Capital

This indicator is another liquidity measure that expands to include all current (within 12 months) assets such as receivables and inventory.

Ratios: Profit Margin (Surplus Margin)

This calculation indicates by what percent revenues are over or under expenses.


  • Compare all check logs for cash receipts to the amounts applied to receivables.  This will be done by an individual separate from those processing cash receipts and accounts receiva

Recording Other Transactions

The general ledger is the journal where all transactions are posted throughout the year and balances are maintained.

Revenues/Deferred Revenue

  • Establish policies for revenue recognition.  Certain types of revenue (including: dues; subscriptions; and meeting registration fees) may be received in advance of the product

Sending Invoices

Invoices may need to be prepared for a number of reasons. Some organizations sell books or newsletters for a fee. Others require registration for meetings or bill for dues.

Some Legal Issues to Consider When Trying to Get Out of Your Office Lease

As the financial pressures on nonprofit organizations mount and many employees continue to work remotely from home, nonprofits are increasingly examining their options for getting out of their curr

Stewardship & Accountability

As board members and managers of nonprofit organizations, we are constantly reminded that we must be good stewards of the public trust, ensuring the resources of our organizations are well protecte

The Importance of Cash Projections

It is a prudent financial practice to prepare and operate from a budget. The budget is the annual financial plan for carrying out the strategic plan and mission of the organization.

The Importance of Operating Reserves for Nonprofits

What is an operating reserve, and why does every nonprofit need to address this issue?

Three Easy Ways to Safeguard Your Church's Assets

As church members, we probably do not want to entertain the idea that the people handling the church finances could be dishonest.

Three Key Financial Mistakes that Financial Stewards Often Make

As stewards of critical resources that allow faith-based organizations to survive and do the good works they are called to do, those in position of managing the finances of religious organizations

Time Sheets

Not-for-profits must record expenses on a functional basis. Salaries are generally the organization’s largest expense.

Travel Expenses

  • Create a standardized travel reimbursement request form with instructions for completion.  Excel can be used for the form so totals will be automatically calculated once the form is

When Too Much Money Can Disrupt an Organization

It sounds counterintuitive, but many nonprofit organizations face situations where getting too much money in the form of grant and contract revenue can threaten their ongoing viability.

Who is Reviewing Your Key Contracts?

Ensuring that the appropriate individuals are reviewing key contracts is essential to identifying, quantifying, and, if necessary, reporting financial liabilities in a timely manner.

Writing Checks

Having the appropriate number of people involved in processing transactions, the less likely it is that a problem will occur.


Subscribe to Financial Management