Certified auditors have a considerable amount of number-crunching to do when they examine the books opened by nonprofit organizations. The most important section of a nonprofit’s accounting ledger concerns revenue. Auditors look for evidence of insufficient revenue, as well as revenue heading downwards, to detect the red flags that indicate a nonprofit is struggling financially.
Despite a certified auditor’s keen eye for noticing flaws in a revenue stream, you should not wait for a quarterly audit to determine the financial health of your nonprofit organization. Waiting until the next audit might mean your nonprofit organization has waited too long to monitor revenue.
Let’s review a few sources of revenue that your nonprofit should be tapping into to meet your financial goals.
Donations represent the most substantial form of revenue generated by most nonprofit organizations. Compare individual donations from the past year with donations submitted during other years to determine the strength of your revenue growth. Coming out of the pandemic, individual donations for a vast majority of nonprofits have declined. However, your nonprofit should have started seeing a rebound in individual donations, as well as donations from corporate sponsors.
Government grants differ significantly in size, as well as the frequency in which government agencies provide financial assistance to nonprofit organizations. You might receive approval for a government grant that covers operational costs, such as the amount of money your nonprofit pays for utilities. Other types of government grants help nonprofits launch a fundraiser drive by providing financial assistance to purchase electronic communications devices. Your nonprofit can apply for a government grant that pays for client services as well.
Your nonprofit can tap into the financial resources offered by a wide variety of foundations. One example of how foundations help nonprofit organizations achieve their financial goals regards the many foundations that contribute to the operational costs of public television stations. Foundation contributions do not make as many donations as individual donors, but they contribute a significant percentage of financial resources to nonprofit organizations.
As private foundations, corporate foundations represent endowment funds that are operated separately from a corporation. A different team of professionals from the team of professionals working for the corporation manages the foundation’s resources, including where to contribute financial resources in the nonprofit sector.
Foundations such as the Ford, Gates, and Rockefeller Foundation contribute to nonprofit organizations operating around the world. Many family foundations partner with government agencies to help finance worthy missions, such as educating different cultures about the importance of promoting reproductive health. Many family foundations like to contribute to charities operating in the towns where the foundations have established headquarters.
Community foundations represent the largest type of foundations, as they pool financial resources from the most donors. This type of foundation strives to improve the standard of living for residents of a community, from awarding college scholarships to eligible high school students to approving grants that fund specific public works projects. Community foundations frequently hold “giving days” to help local nonprofit organizations raise money.
Ensure your nonprofit receives a regular audit to determine the financial health of your revenue stream. An experienced team of auditors can help your nonprofit organization discover new sources of revenue to fund projects.