When looking for ways to appeal to donors, nonprofits typically turn to storytelling as a chance to show a compelling need for the communities they serve. They collect testimonials, show touching pictures, and share stories of how they created positive change.
While it is effective to show programming efforts and results, many donors also want to see the organization’s financial position to understand how their money was or will be used. And they want to know that their contribution will have a direct impact on the causes they hold dear. In many ways, financial statements and reporting are one of the most important ways a nonprofit can tell its unique story and the difference it is truly making.
Financial statements of not-for-profit organizations are now required to be updated with FASB 2016-14 in the upcoming periods. But while it may seem like yet another task to take on, organizations should be taking these changes to heart and seeing how they can improve their story each year through the use of the financial statements. There are several new or enhanced disclosures required, one example being the new liquidity footnote disclosure.
Through this new requirement, organizations must now disclose the availability of financial assets to meet cash needs for general expenditures within one year of the balance sheet date. Rather than treat these financial statement changes as a burden, consider them an opportunity to paint the picture of how your year went and why donors should continue to contribute.
Using the liquidity footnote addition as an example, what will your available cash look like in a year? What does this mean to a donor and how can you explain a low-cash position versus a high-cash position to continue to encourage donor contributions or new grants? Many not-for-profit organizations can explain a strong liquidity position in that they have skilled management and are well equipped to handle growth.