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Posted By sal On August 2, 2009 @ 8:31 pm In | No Comments
Seven types of nonprofit income exist. Have you fully explored all of them?
1. Mission Income
This is earned income you receive from a customer who pays the nonprofit to receive a mission-related service or product. For example, it is the income from ticket sales for your theater production. Mission income can range from a token fee to one that covers costs and provide resources for others who cannot afford a fee or support for general operations. This income is a close match to the income for-profit’s earn.
2. Individual Donations
Gifts from individuals are the largest source of donated income. They include gifts from pennies to fortunes. Individuals provide many benefits. Besides money, when successful individuals partner with your nonprofit, you often receive their ideas, problem solving skills, and introductions to other community leaders.
Government income includes grants, contracts, earmarks, and public-private partnerships. Some nonprofits are government mandated and funded with public resources. Others, while not birthed by government decree, earn significant income from government entities. Most nonprofits, with some exceptions such as religious bodies that seek funds to proselytize, can identify one or more potential government funding sources.
4. Foundations and Other Grant Giving Entities
Approximately 125,000 foundations exist in the United States and Canada. To meet their goals, foundations provide grants to nonprofits usually via a competition. Foundations range in size from small family organizations where relatives meet yearly to disburse funds, to international organizations with large staffs. Each is unique. Each has its own parameters and goals in distributing money. Your nonprofit organization’s ability to access this income depends on the fit of your mission and proposal with the foundation’s goals. This category, also, includes other organizations that provide grants such as United Ways, Rotary Clubs, and Junior Leagues.
Corporations also provide income to nonprofits. Who can take advantage of these opportunities? Most commonly, nonprofits that reach customers with whom for-profits would like to communicate. With some creativity, most nonprofits can tap business funding. To grow this source, nonprofits examine the needs of businesses around them, find places where customers overlap, and design ways to partner to reach mutual goals. While all nonprofit income sources have an element of quid pro quo, with business sources this exchange is more overt.
6. Unrelated Income
Over time nonprofits have created heaps of earned income opportunities that provide them income without any mission benefits, except that profits from these help the nonprofit. Examples include room rentals and beverage sales. Often nonprofits use unrelated income to buy necessary but unattractive items, such as cleaning supplies and employment taxes. While unrelated income may require different tax treatments (check with your accountant), unrelated income’s flexibility– you can spend it on whatever is needed—guarantees its continued appeal.
The last income stream available to nonprofits is not cash. Instead, it is gifts of services or goods that make cash unnecessary. In-kind includes the meeting room that a local church provides you once per month for board meetings. It includes donated clothes and food. It consists of the fee waiver the city provides your annual festival. It comprises all volunteers, such as those used by a college to help with orientation. Almost all nonprofits obtain some in-kind. It is important to plan for it as you plan your income because you often can obtain in-kind that frees up cash for other necessities.
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