Non-profit organizations have a unique challenge when it comes to funding. They can’t depend on shareholders like for profit organizations can. They need to prove that their cause is worth investing in. It is sometimes difficult generate interest in the cause without compromising the mission. There are also issues with misrepresenting revenue streams and maintaining that fine line between mission based revenue and non-mission based revenue.
Mission Critical Basics
It is critically important that your organization has a good understanding of your mission. Organizations that don’t have this understanding are more likely to err in reporting unrelated business income. They also can come under scrutiny by potential donors.
Non-profits have six revenue streams to tap. These revenue streams are dependent on the mission. The mission’s message comes from the core causes you support. Clear, targeted messages are necessary to generate needed revenue. These six revenue streams are:
- Membership dues
- Program revenues
- Fundraising events
- Public and private grants
- Investment income
The first five revenue streams have been around for a long time. The last revenue stream is relatively new. It is important when you decide on revenue streams for your non-profit to understand the risks involved. Nonprofits are accountable to the communities they serve. Contributors expect to have a clear understanding of where their money will be spent. Members have a vested interest in the organization. Program revenues need to be well documented.
There is a potential risk involved with fundraising events. It can be easy to lose sight of why you are raising funds. Your message may get lost in the “hustle and bustle” of putting on the event. You are dependent on people showing up and participating. You have planning and advertising costs.
Documentation is a key component when applying for public and private grants. Non-profit organizations that can’t prove their existence soon disappear. Tapping into this resource does take time and effort.
The last revenue stream, investment income, provides a steady income stream for larger non-profit organizations. Investment income is income that investors primarily utilize to create a solid foundation. In other words, this type of income shows that the investor is fully vested in the organization.
Finding Business Sense in a Non-Profit World
Non-profit and for-profit organizations rely on basic accounting principles. Non-profit organizations however deviate in how they maintain and grow their business. This is especially true when you consider how non profit accounting practices need to take into consideration revenue stream sources.
Growing Pains: From Simple to Complex
Growing pains happen to every non-profit organization. Unbridled growing pains can create havoc to your organization. It can also bring unparalleled opportunities. A relatively simple accounting procedure might result in an inflexible and unusable system of checks and balances. The more your organization grows, the more you’ll need to invest in a more robust accounting system and maybe even one specific to your nonprofit. There is a multitude of accounting software out there, and there is even some that is specific to non profit accounting. Newer cloud based accounting software can help you in the following ways.
- Provide you will much needed information to understand your present and future status.
- Help you understand and clarify donor information and other revenue streams.
- Help your contributors and donors understand where their monies are going.
- Get you a clear picture of your organization so you can focus on your mission.
- Make the necessary connections with the data.
It is just as equally important in a non-profit organization as it is in a for-profit organization to have accurate accounting of both assets and liabilities. Contributors and donors do expect your organization to remain accountable.
In generating revenue for your nonprofit organization, remember to keep everything about the organization’s mission. Don’t be afraid to try some new methods of getting funding for your organization and its cause, and make sure you keep it as close to a business as possible to ensure success. You can be very successful in achieving your goals if you focus on your mission and organizing the small parts of your nonprofit.
by: Mikkie Mills