Chapter 2 Summary: Income Statement - Nonprofit Association of Washington

Summary...

The income statement is a report that shows the organization’s financial results – actual income and expenses compared to the budget – over a period of time.
Nonprofits have two main types of income – support and revenue. Also, nonprofits are required on the IRS Form 990 to track expenses by both functional classification, which groups expenses according to purpose, and natural category.
All board members should receive and review the organization’s income statement monthly. Review the income statement for significant budget variances, anything unusual, or any unexpected trends.
Multiple sources of funding help ensure financial stability, ultimately protecting the organization from operating issues that may arise from a sudden change or loss of a significant funding source.

In reviewing the income statement, are there any trends or changing relationships the board should consider?
How diversified are your nonprofit’s funding sources? Is your nonprofit’s budget overly dependent on a single revenue source? Are the funding sources consistent and reliable?
If your nonprofit’s revenue is diverse and consistent, what opportunities exist for new program investments or investing in reserves?

Use your income statement to tell a story. At your next board meeting, instead of asking “Do you have any questions?” think about a prompt like “What is one observation that you had after reviewing the financial report?” Then invite each board member to share their one observation to build a financial story together.
Learn more about budgeting for nonprofits with resources from the National Council of Nonprofits and Propel Nonprofits Budgeting: A 10-Step Checklist.