Question

suppose you are a new board member for an emerging not-for-profit organization hoping to attract new donors. Contributors want to know how efficiency not-for-profit organizations use their donations. unfortunately, your fellow board members see little value in financial reporting and analysis and believe the good works of the organization speak for themselves. Prepare a fact sheet convincing the board of the need for effective financial reporting with argument about why it helps the organization's fund-raising goals.

Answer 1

Please leave a like, Thank you.

Effective financial reporting:

The organization is a not-for-profit organization. So the only source of income is the donations of the people. There is no other source of income for the organization. So it will be beneficial if they maintain the financial reports of the Company. This will make it more accountable to the people who donate the money to the organization.

The financial statements that can be prepared are:

a) The Balance Sheet

b) The Income Statement

c) The Cash Flow statement.

The balance sheet follows the basic accounting equation:

Assets = Liabilities + Owner's Equity.

The balance sheet gives the assets that show the property that is owned by the business. The liabilities show all the payments that are to be made by the company. When the liabilities are subtracted from the assets then the amount remaining is known as owner’s equity. The term owner’s equity will give the owner’s share of business.

The income statement or the profit and loss statement shows the profitability or loss. The cash flow statement gives the flow of cash in and out of the business.

The following are the benefits of financial reporting:

1. Informing stakeholders: The actions of a company will affect many people and groups. These are the company's stakeholders. Stakeholders may be internal or external to the Company. Stakeholders use financial information to decide about the company. All major decisions about the Company will be taken on the basis of the financial reports of the Company. Timely financial reporting is very important for the Company’s stakeholders.

2. Improved financial management: Timely financial reporting helps to find out, examine and take corrective measures to recover any weakness. There will be more transparency if the financial records are made available in the public. It will also be considered as a good indicator of financial management.

3. Better resource management: The financial reporting will help the company to manage their resources in a better manner. They can keep a record of the resources used and the benefit that the resource is providing to them. The Company can also make changes in the resource allocation and make note of the changes through financial reporting.

4. Timely production of accounts: The financial reporting will provide everyone with assurance of good financial governance in the company. This will improve the impression of the Company in the minds of the stakeholders.

In conclusion, it can be said that a good financial reporting will help the Not-for-profit organization to get more donations due to their accountability and credibility that is observed from the reports.