HR Workforce Solutions
By Nonprofits, For Nonprofits
Nonprofits are driven by a mission to address societal needs and provide public benefits. This distinguishes them from profit-driven enterprises. While their primary focus isn’t financial gain, nonprofits must still navigate the economic landscape to sustain their operations and fulfill their missions effectively.
So, how do nonprofits make money? What strategies do they employ to fund their vital initiatives and programs?
Let’s dive into the topic of how nonprofits make money to ensure they can continue to make a positive impact on the communities they serve.
How to Make Money as a Nonprofit
In the realm of nonprofit management, the pursuit of financial sustainability is a perpetual endeavor. The following multifaceted strategies and avenues help nonprofits secure the resources necessary to advance their missions effectively. Here’s a look into how to make money as a nonprofit.
Traditional Donations
At the core of nonprofit funding lies the generosity of individuals and corporations. Their contributions fuel the organization’s mission-driven initiatives. These donations, whether large or small, provide the essential lifeline for sustaining operations, funding programs, and driving innovation. They empower nonprofits to make meaningful strides toward societal change.
Cultivating strong donor relationships, implementing effective fundraising campaigns, and showcasing transparent stewardship of funds are key to maximizing the impact of traditional donations. They foster long-term support for the organization’s endeavors. Additionally, demonstrating the tangible outcomes and transformative impact of donor contributions strengthens trust and loyalty. This inspires continued engagement and philanthropic support from both individuals and corporate partners.
Grants
Beyond individual donors, nonprofits often rely on foundation grants and government funding to support their initiatives. These grants offer significant financial backing, enabling nonprofits to undertake ambitious projects, expand their reach and address pressing societal issues. However, securing grants requires meticulous research, strategic alignment with funders’ priorities and robust grant management practices. All of this effort is to ensure compliance, accountability, and sustainable impact. Nonprofits must demonstrate their capacity to deliver measurable outcomes and effectively steward grant funds to maintain credibility and foster future funding opportunities.
Fundraising Events
From galas to auctions and charity walks, fundraising events serve as not only revenue-generating opportunities but are also powerful tools for community engagement and awareness-building. These events create platforms for supporters to rally around the nonprofit’s mission. They forge lasting connections and inspire ongoing support. Nonprofits can amplify their fundraising efforts and broaden their impact by leveraging creative event planning, effective marketing strategies, and volunteer mobilization.
Earned Income
Nonprofits are increasingly exploring alternative revenue streams beyond traditional fundraising methods. Social enterprises, fee-for-service programs, and merchandise sales offer avenues for generating income while advancing the organization’s mission. Whether through the sale of products, services, or experiences, nonprofits can diversify their revenue sources. This revenue helps them achieve greater financial resilience in an ever-changing landscape.
Corporate Sponsorships and Partnerships
Collaborating with businesses presents nonprofits with a myriad of opportunities beyond financial support. Corporate sponsorships and partnerships offer a gateway to expanded visibility and promotional exposure. They enable nonprofits to reach broader audiences and raise awareness for their causes. These collaborations also foster employee engagement. This encourages corporate staff to volunteer, fundraise, or participate in community service initiatives alongside nonprofit personnel.
In addition to financial contributions, businesses often bring valuable resources to the table. Their expertise often includes in-kind donations to access specialized expertise and networks. Through strategic partnerships, nonprofits can leverage these resources to enhance their capacity, innovate their programs, and extend their reach.
Investments
For financially stable nonprofits with a substantial financial base, investments offer the potential for additional income generation and long-term sustainability. Through investments, nonprofits can diversify their revenue streams and build financial reserves to weather economic uncertainties and fund future initiatives. This approach strengthens the organization’s financial footing and enhances its ability to adapt to changing market conditions. The nonprofit is able to seize new opportunities for growth and impact.
Reducing Costs for Nonprofits
The question, “How do nonprofits make money?” is a viable one, but income is not the only concern for these charitable organizations. While revenue generation serves as the lifeblood of nonprofits, prudent management of expenses is equally crucial for long-term sustainability.
By implementing strategies to enhance operational efficiency, nonprofits can streamline processes, reduce waste, and optimize resource utilization. The following are a few strategies nonprofit organizations use to reduce costs:
These concerted efforts not only optimize financial resources but also enhance organizational resilience and agility. Understanding how to make money as a nonprofit involves a combination of revenue generation and cost reduction.
Are You Still Wondering, “How Do Nonprofits Make Money?”
So, how do nonprofits make money? In the dynamic landscape of nonprofit management, the pursuit of both revenue-generating and cost-saving opportunities is critical for organizational success and sustainability. Nonprofits can position themselves for long-term growth and impact by embracing innovative strategies, fostering strategic partnerships, and prioritizing financial stewardship.
We urge nonprofit leaders and stakeholders to harness the insights and recommendations outlined in this guide. You’ll quickly recognize the transformative potential your organization holds for advancing its mission and creating meaningful change. At UST, we empower nonprofits to thrive, inspire, and continue their vital work in building a brighter future for all. For additional support and resources, explore our UST solutions. Our experts will guide you toward operating a more sustainable and impactful nonprofit organization.
Nonprofit organizations form the backbone of societal change. You work tirelessly to advance your causes despite tight budget constraints. It’s crucial for your organization to implement cost-saving strategies that align with your goals and ethics. Through astute financial planning and strategic decision-making, your nonprofit can amplify its impact and extend the reach of its funding. Leveraging historical stability and pooled knowledge, such as entities like UST, your nonprofit can fortify its financial foundation amidst the ever-evolving economic landscape.
Below, we present ten actionable cost-saving strategies designed to support nonprofit leaders in their ongoing efforts to manage budgets more effectively and channel saved resources back into their mission-critical activities.
1. Streamline Operations Through Technology
In an era where digital transformation is vital, investing in technology can lead to considerable long-term savings. Automating mundane tasks reduces labor costs and increases efficiency, allowing staff to focus on more essential, mission-focused work.
2. Harness the Power of Volunteers
Volunteers are an invaluable asset to any organization. They not only bring passion and dedication, but also help save on personnel costs. However, manage volunteers responsibly to ensure their experiences are rewarding and further your cause.
3. Go Green to Save Green
Implementing eco-friendly practices goes beyond the moral benefits; it is also cost-effective. Cutting down on paper use, optimizing energy consumption, and recycling can lead to substantial savings.
4. Opt for Second-Hand Equipment
Before rushing to buy new equipment, consider purchasing quality second-hand items. Not only is this more economical and sustainable, but often you can find barely used resources at a fraction of the cost.
5. Leverage Free or Discounted Services for Nonprofits
Many companies offer discounted or even free services to nonprofits, including software subscriptions, marketing tools, and professional development resources. Take advantage of these opportunities.
6. Invest in Staff Development
While this may seem counterintuitive as a cost-saving measure, training your staff can actually reduce costs by improving efficiency and reducing turnover – both of which are costly in the long term.
7. Collaborate with Other Organizations
Forming alliances with similar nonprofits can lead to sharing of resources, joint grant applications, and mutual support, thereby reducing costs associated with events and projects.
8. Conduct Regular Financial Reviews
Assessing your financial practices regularly can help identify inefficiencies and areas for cost reduction. Keep abreast of financial management best practices and remain compliant with regulations.
9. Optimize Your Fundraising Practices
Ensure your fundraising efforts are as effective as possible by cutting unnecessary costs and using data-driven strategies. Tailor your campaigns to target the most engaged sectors of your donor base.
10. Reevaluate Your Space Needs
If remote work is sustainable, consider downsizing office space or renegotiating lease terms. This can be one of the most immediate ways to reduce fixed costs while maintaining productivity.
Taking these steps can contribute significantly to reducing expenses, but achieving optimum efficiency often requires tailored solutions. That’s where we can step in to assist you further. UST is well-versed in the unique challenges faced by nonprofit organizations and offers expert advice to help you save money, mitigate risk, and increase efficiency.
Don’t leave potential savings on the table. For a more detailed exploration of how these strategies can benefit your organization, and to discover additional, customized solutions for cost-savings, complete ourfree savings analysis. Fill out our free savings analysis form today and start charting a course towards financial sustainability for your nonprofit.
At UST, we’re committed to helping you make every dollar count, underscore your mission, and amplify the change you envision.
Although nonprofits usually have exemptions from paying taxes, they must still file tax returns each year. Nonprofits file certain forms, depending on the type of nonprofit and the amount of annual revenue. Nonprofit organizations that maintain high levels of organization can find ways to save money and minimize complications in the tax-filing process. With this information, you will understand how to file taxes for a nonprofit.
Nonprofit tax returns involve a clear and honest accounting of the organization’s gross receipts and expenses for the year. Although nonprofits do not have to pay federal taxes and may be exempt from other kinds of taxes, the organization must demonstrate proper asset management and compliance with local and federal tax laws. These tips can help you manage your nonprofit tax obligations.
Nonprofits can only maintain a tax-exempt status through correct use of revenue. Organizations with a nonprofit classification include religious institutions, public safety organizations, charities, research organizations, and more. To preserve your tax-exempt status, you must prove that any revenue goes to other tax-exempt organizations, minus expenses.
To simplify the process of filing your nonprofit tax documents, you should aim to organize and maintain accurate records. The amount of detail that the IRS requires for nonprofit filing depends on annual revenue and type of nonprofit. Since you may need to provide exacting detail of all your expenses, you should ensure that you have those records at hand.
Nonprofits can deduct certain expenses needed to run the organization when balancing revenue and costs. Common deductions include:
If you are unsure of the deductions you may qualify to take, you should consult a professional for detailed advice.
In many cases, nonprofits are eligible for tax credits, as well. For example, if your nonprofit chooses to make certain clean energy upgrades to an office space, you may qualify to receive a credit for the expenses needed to complete the upgrades. Because nonprofits do not pay federal taxes, they can get the credit in the form of a direct pay reimbursement.
Many state and local governments offer additional incentives to nonprofits. Some states allow nonprofits to avoid paying sales tax, for example. If you qualify for these types of incentives and tax breaks, keep track of your records. Remember to file claims within the designated claim period, so you can minimize expenses.
Tax laws change every year. Part of learning how to file nonprofit taxes includes staying current on tax laws, so you understand your responsibilities, deductions, credits, and other opportunities. Before you start preparing your taxes, confirm that you are looking at the latest documents for the appropriate tax year.
Although eligible organizations do not pay income taxes, nonprofit payroll must still include payroll taxes, including Social Security and Medicare deductions. Since employee compensation can represent a significant portion of your deductions, you should confirm that you have followed proper procedures. If you struggle to manage these tasks, consider arranging for payroll services for nonprofits.
Failing to file taxes at the appropriate time can lead to penalties, including the possible loss of tax-exempt status in certain cases. Your nonprofit tax filing deadline depends on the tax calendar that your organization uses. Start preparation early, so that you have time to address issues before the filing deadline.
If you have all your files organized and ready for filing, you may find that the process takes less time than you expect. Plan to complete the following steps:
If you have questions or concerns about the information you must provide, you should consider hiring nonprofit tax help.
To avoid complication and confusion around filing your nonprofit taxes, you can call on UST for expert assistance. We specialize in solutions for nonprofits, including payroll management, tax document organization, and more. We can help you understand your tax filing status and get ready for tax season, in addition to offer our services for unemployment for nonprofit organizations. Contact us to learn more about our services or to request a free savings analysis.
SOURCES
https://labyrinthinc.com/how-to-prepare-a-nonprofit-tax-return/
https://donorbox.org/nonprofit-blog/nonprofit-tax-returns
https://www.irs.gov/charities-non-profits/exempt-organization-annual-filing-requirements-overview
https://www.investopedia.com/ask/answers/08/nonprofit-tax.asp
https://crscpa.com/blog/how-to-make-filing-taxes-for-a-nonprofit-easy-everything-you-need-to-know/
https://donorbox.org/nonprofit-blog/17-ways-to-save-money-as-a-nonprofit
https://www.freshbooks.com/hub/taxes/nonprofit-tax-deductions-for-501c3-organizations
https://www.cleanegroup.org/what-nonprofits-need-to-know-about-the-investment-tax-credit/
According to the 2021 Benchmarks Report, the average nonprofit donor contributed an average of $167 in 2020—this per-donor metric was slightly lower than 2019. The increase that did occur was largely driven by more people giving rather than people giving more. While the global pandemic forced nonprofits to take their in-person events such as, conferences and fundraisers online overnight and propelled most into digital transformation at a pace we thought would take years, not all was lost—there were many positive outcomes.
A year later, it’s safe to say that virtual events and online giving are here to stay. Nonprofit professionals have embraced online fundraising since 1999 when the first “Donate Now” button was released by a project of the Tides Foundation—shaping best practices with 20+ year of innovation and experimentation. It’s more important than ever to understand your donors; what they care about, why they give, their communication preferences, and which social media channels they prefer. Equally important is that you use sustainable fundraising practices that drive predictable fundraising growth.
Below are some key strategies and best practice tips to help your nonprofit build its digital fundraising with low effort and high return.
The most important thing you can learn about online fundraising is that it should be sustainable and predictable. Outside of COVID-19, online fundraising has been driven by the release of new technology and social networking websites over the years, so ask yourself if you have the right tools in place to create a fundraising strategy that is both successful and sustainable.
Understanding the concept of the “business model” for your nonprofit has become a more integral component to maintaining organization sustainability within the nonprofit sector. Nonprofit leaders, grant makers and stakeholders want more insight behind the business and financial foundation of how a nonprofit organization is able to deliver according to their mission drive initiatives.
When discussing the nonprofit business model, often times it will include topics such as, cost to deliver services, mix of sources of funding, and key drives of financial results. Discussions around the financial stability and sustainability, more times than not, focus on the overall health of the balance sheet and operating results of a nonprofit. While each of these are essential components to have a better understanding of an organization’s finances and business model, these types of conversations can lose sight of a critical part of any business—the day-to-day operations. For example, the way a nonprofit organization does business can have a major impact on cash flow.
Cash flow is the net amount of cash and cash-equivalents being transferred into and out of a business. At the most fundamental level, a nonprofit’s ability to create value for shareholders in determined by its ability to generate positive cash flows, or more specifically, maximize long-term free cash flow. Managing cash flow is primarily consisted of questions: when will we pay our staff; when is this bill due and when will this grant payment come in? While there are variety of nonprofit business models, each one has a particular bearing on these types of questions.
A nonprofit business model has two main components: what kinds of programs and services nonprofits deliver, and how they are funded. Each of these components have implications on organizational cash flow that should be understood in order to have effective financial planning.
Below are a few helpful strategies to use when addressing cash flow issues:
1) Understand where funding is coming from: Each type of income stream can have certain implications and challenges for cash flow, so if a business model is built primarily around one type of funding, you will need to understand and plan for those implications and challenges.
2) How to balance cash going in and out: In order to meet operating cash needs in the absence of adequate cash reserves, a nonprofit can turn to a line of credit to meet the temporary imbalance between available cash and expenses due. Credit lines, when used responsibility, can be a useful and vital tool for cash flow management.
3) How to manage cash across your organization: While it may be impossible to ensure that cash is coming into the organization exactly on time and on target to keep things on autopilot, it is possible to plan for those times when it isn’t, and make decisions to be sure that bills and staff are paid on time.
Being informed, strategic, and collaborative in cash flow management can help to ensure that a nonprofit’s long-term strategy isn’t hindered by avoidable and short-term obstacles.
For more information on this topic, please reference this article: https://www.propelnonprofits.org/resources/managing-cash-flow/
Last year, the Financial Accounting Standards Board (FASB) released Accounting Standards Update (ASU) 2018-08, which clarifies the accounting guidelines for contributions received and contributions made—focusing on the grants and contracts awarded by the government and other entities to nonprofit organizations.
You can now listen to the webinar on-demand to learn how to determine if an asset received should be accounting as a contribution or as revenue from customers.
This on-demand webinar will explore how to:
This webinar is part of UST’s efforts to educate the nonprofit sector. For more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly e-News today!
Giving in the U.S. in 2020 will be different in many ways than previously—mainly because of campaigns, economic conditions, and tax law implications. Don’t miss this deep dive into the trends and forecasts of giving in the United States presented by Melissa S. Brown, Principal of Melissa S. Brown & Associates.
This on-demand webinar shares insights into how tracking these trends can help identify future opportunities as well as insights into:
For access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
What is an executive director? An executive director is “responsible for overseeing the administration, the program and the strategic plan of a nonprofit organization. Other key duties may include fundraising, marketing, community outreach, and this position reports directly to the board of directors.” As we all know, an executive director is required to wear many hats and needs to wear them all equally. Leadership styles have a huge impact on how well an executive director can carry out their duties—committed executive directors can set themselves apart when they’re able to evaluate their own leadership styles and seek input from others.
In this role, you’re tasked with the responsibility of both leadership and management and each duty requires a distinct skill level in order to be fulfilled properly. Leaders offer visionary qualities that can provide an overall scope to the organization’s specific problems and future planning. They tend to be a charismatic communicator and have the ability to motivate the team in anticipation of achieving future goals for the organization. Managers are very hands on—they make sure things get done. Not only do they manage people but they also manage property and assets helping to fulfill the goals that management and the board of directors have set before them. They are the busy bees of the organization, who control, organize and monitor day-to-day activities of the operation. Think of an executive director of a nonprofit organization as being the “jack of all trades”.
Along with managing and overseeing everyday tasks, an executive director is responsible for monitoring the finances for an organization—they oversee the development and on-going maintenance of the business model. This ensures the organization produces exceptional mission impact and sustains financial health. To make sure this is done successfully, the executive director has to be aware of the necessary business concepts.
Here are a few key business principles that could help guide financial leadership practice for your nonprofit:
1) Remain high-level and thoughtful with your board.
2) Make sure you’re managing your risks the right way.
3) Be sure to plan for your nonprofit’s reserves.
Executive directors learn that leading a nonprofit requires a constant balancing of current needs, external demands, and planning for the future. Financial leadership is crucial to the role and can not be fully delegated. Certain principles can help executive directors become accustom to the demands of the changing environment and maintain the balance needed for the organization.
Thousands of nonprofits have registered with their states in order to legally solicit donations… do you know what state requirements extend to your organization?
Presented by Affinity Fundraising Registration and hosted by Maia Lee, President of Relations, this on-demand webinar explains the essentials of fundraising registration and what you must do to ensure that you’re registered before filing your next Form 990. With over a decade in nonprofit marketing and development experience, Maia understands the challenges nonprofits face in fulfilling their missions with limited resources and is committed to educating nonprofits about charitable solicitation registration requirements.
You’ll learn crucial details needed to raise funds legally in any state with key information surrounding possible exemptions and how you may be subject to fines and penalties.
Watch the webinar recording today!
Want access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
This educational webinar recording outlines some of the top employee benefits trends shaping the sector this year and presents practical takeaways to inform strategy around:
For access to more learning opportunities, tips and legal updates just for nonprofits, sign up for our monthly eNews today!
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This Privacy Policy and the Terms of Use for our site is subject to change.
UST maintains a secure site. This means that information we obtain from you in the process of enrolling is protected and cannot be viewed by others. Information about your agency is provided to our various service providers once you enroll in UST for the purpose of providing you with the best possible service. Your information will never be sold or rented to other entities that are not affiliated with UST. Agencies that are actively enrolled in UST are listed for review by other agencies, UST’s sponsors and potential participants, but no information specific to your agency can be reviewed by anyone not affiliated with UST and not otherwise engaged in providing services to you except as required by law or valid legal process.
Your use of this site and the provision of basic information constitute your consent for UST to use the information supplied.
UST may collect generic information about overall website traffic, and use other analytical information and tools to help us improve our website and provide the best possible information and service. As you browse UST’s website, cookies may also be placed on your computer so that we can better understand what information our visitors are most interested in, and to help direct you to other relevant information. These cookies do not collect personal information such as your name, email, postal address or phone number. To opt out of some of these cookies, click here. If you are a Twitter user, and prefer not to have Twitter ad content tailored to you, learn more here.
Further, our website may contain links to other sites. Anytime you connect to another website, their respective privacy policy will apply and UST is not responsible for the privacy practices of others.
This Privacy Policy and the Terms of Use for our site is subject to change.
