Understand Receivables: a NFP Board Member’s How-to Guide

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Understand Receivables: a NFP Board Member’s How-to Guide

This article is part of a four-part series that defines key terms and important information for a board member to know and understand. The other three articles discuss accounts payable/accrued liabilities, deferred revenue and contributions and the basics of financial statements.

It’s not a requirement for all board members to be accountants, but there are some accounting terms that all board members should understand. One such term is “receivables.” Very simply, a receivable is an amount owing to an organization.

Common forms of receivables

Importance of understanding receivables
Directors or stewards, need to know what questions to ask when presented with an organization’s financial statement. The only way to do that effectively is to have a working knowledge of the term. Some questions the board may ask include:

As stewards, board members are responsible for ensuring these questions are asked each month. A board cannot meaningfully review and make decisions with respect to finances if the internal financial statements have not accurately addressed the question of receivables.

A clearly defined action plan
Board directors need to ensure processes and procedures exist so that amounts owing to the organization are promptly collected. If there’s no protocols in place, the board would be advised to establish some.

Directors are not liable for the amounts receivable; however, many non-profit organizations do not maintain significant cash reserves and are dependent on consistent cash flows to meet obligations. A build-up of receivables can expose an organization to challenges in meeting its goals.

GGFL is well versed in the non-profit realm. We have a team dedicated to the sector and are happy to offer advice and guidance to board members and organizations. Visit ggfl.ca/non-profit-organization/ to learn more.

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