Know

Summary...

  1. 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.
  2. 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.
  3. 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.
  4. 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.
Reflect

Here are some questions to think about...

  • 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?
Grow

Next steps...

  • 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.

Chapter Materials

Finance Unlocked For Nonprofits Guide

Start by downloading the Finance Unlocked for Nonprofits guide that includes practice activities, worksheets, and ...

Chapter: Income Statement – Guide

Download this chapter's guide before watching the video.

Chapter: Income Statement – Video Transcript

Video transcript with visual descriptions for the Finance Unlocked for Nonprofits Income Statement video

Sample Income Statement

Sample Income Statement from the Finance Unlocked Guide
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