Learning patterns/Making an annual financial report
What problem does this solve?
Nonprofit organizations are often required by local regulations to make a financial report each year. Wikimedia Chapters may be required to submit a public report each year, as part of their chapter agreements. Other groups, organizations, and individuals, may want to share information about their finances with the broader movement or world, to show they are accountable for the donations and grants they receive.
What is the solution?
Create an annual financial report showing your income and expenses for your fiscal year.
- Make sure someone at your organization is responsible for tracking your organization's finances and making an annual financial report each year. It might be a good idea to assign two people to this important task.
- Start by defining your fiscal year. Some organizations will want a fiscal year that lines up with the calendar year. Others may have a fiscal year that runs from July to June or for another 12-month period, depending on the organizations needs and local regulations.
- Make sure you clearly note the time period (fiscal year) the report covers on the title page or first page of the report.
- Make your financial report within a few months of the end of each fiscal year. Give yourself enough time to close out expenses for the year, but not so much time that you can't track down information that you need to do the report.
- Use a spreadsheet or accounting software to track your expenses throughout the year. Make sure that your entire board is able to view this information.
- Consider reviewing your finances each week or each month to make sure your income and expenses are on track.
- If required by local laws or regulations, or by your grant agreement, be sure to track and file receipts documenting expenses.
- Include a list of money your organization received and list where the money came from. If your organization received money from many different sources, you can group these into categories. Common categories are donations, restricted grants, unrestricted grant, membership dues, interest, reserves.
- Include a list of money your organization spent and list what you spent it on. If your organization had many expenses, you can group these into categories. Common categories are expenses by program and operational expenses like insurance, office rent, office expenses, salaries, staff expenses, travel expenses.
- Include information about your organization's reserves (if you have them) in this report.
- Include your planned budget in your financial report, so that readers can understand how you spent or what you received against your plan.
- Include your previous year's expenses in your financial report, so that readers can do a year-over-year comparison.
- Consider including helpful visualizations, such as a pie chart showing how you spent your funds, or a bar chart showing year-over-year spending and income.
- You can make a separate financial report, or include a financial report in your organization's activity report.
Things to consider
- You can also use your annual report to inform your organization's financial planning.
- Organizations with large budgets may be required by local laws and regulations, or by grant agreements, to provide additional information in their financial reports, or to have their finances audited on an annual basis.
When to use
- This pattern is particularly useful to Wikimedia Chapters, who are asked to submit an annual financial report, but it can also be used by user groups, allied organizations, and program or project leaders.
- Learning pattern about using the Reports page
- Learning pattern about monthly reports
- Learning pattern about making an annual report
- Resources on finance from the organizational effectiveness learning center