If you work for a non-profit organization, you know how important it is to have a solid financial reporting system. But what exactly is a financial reporting system? And how can you create a system that works for your non-profit? In this guide, we’ll explore the answers to those questions and provide you with some tips to ensure that you have an effective financial reporting system in place.

😎 What is a Financial Reporting System?

Before diving into how to create a financial reporting system, you need to understand what it is. Simply put, a financial reporting system is a set of guidelines and procedures that a non-profit organization uses to report financial information. This information includes income, expenses, assets, and liabilities. The goal of a financial reporting system is to make sure that the organization’s financial records are accurate, reliable, and up-to-date.

A balance sheet displayed on a computer screen.

🏢 Create a Chart of Accounts

A chart of accounts is a list of all the accounts that the non-profit organization will use to record financial transactions. This chart serves as the foundation of a financial reporting system. It includes all the accounts such as income, expenses, and assets, and should be organized in a logical and consistent way. It is recommended to create a chart of accounts that matches the specific needs of your non-profit, with all the categories and subcategories that are relevant for your organization.

A chart of the accounts displayed in a table.

📊 Maintain Accurate Financial Records

In order to have an effective financial reporting system, it’s important to maintain accurate financial records. This means keeping track of all income and expenses, and making sure that all financial transactions are properly recorded in the non-profit’s accounting software. It is recommended to have an experienced accountant or bookkeeper to ensure that the financial records are kept in an organized manner which simplifies the process of financial reporting when necessary.

People going through files and documents in a filing cabinet.

💻 Choose the Right Accounting Software

Choosing the right accounting software is crucial for the success of a non-profit’s financial reporting system. The accounting software should be easy to use, have the necessary features needed to manage the finances of the non-profit, and be able to generate useful financial reports. It may help to go for software specifically designed for non profits, such as QuickBooks Non-Profit Edition, that has pre-built templates and automated entries for financial activities related to non-profit organizations.

A person typing on a computer using accounting software.

📈 Analyze Your Financial Reports

One of the most important aspects of having an effective financial reporting system is analyzing your financial reports. By doing so, you can identify any areas where your non-profit is spending too much money, or where you are not generating enough income. This information can then be used to make informed decisions about the future financial plan of the non-profit.

Two people analyzing financial reports on a table.

🔍 Verify Your Financial Information

It’s imperative to ensure that the financial information reported is accurate, this is especially true if the non-profit receives donations or grants. Donors often require proof of the money spent to ensure it is appropriate. By verifying the financial information presented you build trust with the donors through transparency as well ensuring future funding is more likely.

A person looking at a sheet of paper with numbers and boxes of financial information.

🧑‍💻 Regularly Update Your Financial Reports

Maintaining accurate financial records includes updating financial reports on a regular basis. This information should be reviewed regularly by the Board and other decision makers in the organization. By doing so, you can determine how the non-profit is performing financially and make any necessary adjustments to ensure the financial stability of the non-profit.

A person using a computer to update financial reports.

🎉 Conclusion

In conclusion, a solid financial reporting system is important for any non-profit organization who heartily relies on donations, grants, and other funding sources to maintain their projects. It’s recommended to start by creating a chart of accounts suitable to the organization, maintain account records accurately and up to date, select the appropriate accounting software, analyze the financial reports regularly, verify the information reported, and lastly keep financial reports updated for decision-makers to continuously identify the non-profit’s financial status.

A picture of a bunch of people who is happy and excited about achieving good financial status.