An emerging non-profit organization hoping to attract new donors should always indicate how much money was gathered and how it was spent and what positive changes have been done thanks to the contributors. It is naive to assume that the good works of the organization can speak for themselves. In fact, the reality is the opposite: contributors want to know how efficiently not-for-profit organizations use their donations. Therefore, the board needs effective financial reporting since it will help the organization to fundraising goals.
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Financial reporting can be beneficial for a non-profit organization for several reasons. First, financial statements or financial reporting will help satisfy contributors’ interests in how the organization hands their money. According to the definition found in Understanding Business, a financial statement is a summary of all the financial transactions that have occurred over a particular period (Nickels). As a rule, a financial statement includes transactions made during one calendar year or fiscal year, which begins at any date suggested by the business representatives. The ability for the contributors to check how exactly their money was spent can drastically increase the level of their trust towards the organization.
Second, the presence of financial reporting makes it clear that everything is fine with the health of the non-profit enterprise. Financial statements indicate the health and stability of a particular firm (Nickels). In fact, these two factors are believed to be crucial in any decision-making process, especially it concerns those of potential or current contributors. If a potential contributor sees the presence of financial reporting, he or she starts to trust the company due to financial clarity and trustworthy facts. Therefore, the owners of the firms and bondholders should pay attention to such elements of financial reporting as the balance sheet, the income statement, the statement of cash flows.
The most crucial element of a contributor is the third one, the statement of cash flows. According to Nickels, the statement of cash flows provides “a full summary of all money coming into and out of the organization and also aimed to track the organization’s cash and receipts payments” (p.481). The income statement is not applicable here since is mostly connected to the overall revenue and income of a profit-oriented company. In other words, the income statement is the revenue earned by selling something over some particular period. The implementation of the online applications to show the given statement on the official website will lead to the simplification of reporting processes. It is true that accountants and bookkeepers had to enter all of their organization’s financial data by hand (Nickels). Without a doubt, the introduction of cutting-edge and online advanced technologies can make this process much easier. In the twenty-first century, it would be helpful to integrate the online-based accounting program into the section of the official website and make all the accounting operations right in place. This change will kill two birds with one stone since it instantaneously makes all the information available for contributors and helps accountants in their hard work.
As can be concluded, the non-profit organization should use the statement of flows to make sure that all contributors (both potential and current) trust the firm and believe in its clarity and financial health. In order to achieve great results and help the organization’s accountants with their work, it would be a wise idea to implement the financial statement on the official webpage. This change will show that there is no fraud in transactions of the organization in question.
Nickels, William et al. Understanding Business. Mcgraw-Hill Irwin, 2013.