The Nonprofit Administration Dilemma: How Much Should You Spend on Fundraising? 2025

what percentage of a nonprofit budget should be fundraising

If your organization is fortunate enough to attract in-kind donations, record these contributions to abide by legal standards and create plans to thank specific donors. According to the 2023 M+R Benchmarks Study, nonprofits spent an average of $0.11 on digital advertising for every dollar of online revenue in 2022. Nonprofit investment in digital advertising increased by 28%, with 56% devoted to digital fundraising, 26% to brand awareness, and 15% to lead generation.

Monitor cash flow regularly

  • An organization with a ratio of 1.0 would have one dollar of assets to pay for every dollar of current liabilities.
  • Your board also has to consider compliance issues related tofundraising expenses.
  • They usually take the journey because of the economy, but not because they want to rely on grants.
  • These events can foster a sense of community and shared purpose, enhancing the emotional connection to the cause.
  • Online challenges, such as virtual races or fundraising competitions, create interactive and engaging experiences for supporters.
  • Linkedin fundraising campaigns are an effective way for nonprofits to reach out to their supporters and maximize their fundraising efforts.
  • If your nonprofit relies heavily on grant funding, this budget outlines program costs to meet grantor specifications, including fund-matching requirements.

Additionally, diversifying your funding sources can lead to new relationships and partnerships that can further expand your organization’s reach and impact. Traditional fundraising methods, such as direct mail, flyers, and print advertising, can also be effective when integrated into your nonprofit fundraising strategy. Complementing your digital efforts with these traditional approaches can help you reach a wider audience and maximize your fundraising dollars. One of the greatest challenges of running a nonprofit is balancing what you want to accomplish with the resources you actually have. Your nonprofit’s budget should be organized to align with other key financial resources, including your internal records, financial statements, and tax returns.

What percentage of a nonprofit budget should be grants?

  • Talking through contingencies now in a thoughtful, strategic way is guaranteed to have better results than waiting to make important decisions quickly in a time of stress.
  • Budgeting is often considered an unenviable task for the finance staff with development staff asked to only provide revenue estimates.
  • The most important thing is to be consistent in how you assign expenses to categories.
  • Nonprofit budgeting formalizes the process of allocating resources to different areas of your organization.
  • Our free courses provide in-depth knowledge on key accounting principles, budgeting strategies, and reporting requirements to help your organization thrive.

It is most useful for nonprofits that want to avoid unnecessary expenditures or when they need to adapt to significant changes in their operating environment. Besides, even if it were as easy as many gurus suggest, individual giving has its own set of problems. Third, this misleading and mistaken belief lessens the urgency among funders and absolves many of their impetus to change. I have been on multiple panels now where this statement is used by foundation staff to deflect valid criticisms aimed at foundations. Usually it is done with a bit of modesty, a humble suggestion that foundations really aren’t all that powerful or important. But whether we like it accounting services for nonprofit organizations or not, funders play a significant role in the sector.

what percentage of a nonprofit budget should be fundraising

What percentage of your nonprofit budget should salaries and administrative expenses be?

what percentage of a nonprofit budget should be fundraising

About 21% of all non-profits have an annual budget of less than $50,000 – that’s basically one full time employee scrounging for rent. Another 18% have a budget between $50,000 and $100,000 – so they’re operating on two shoestrings instead of one. With access to the specifics of nonprofit spending to show where donor dollars go, you’ll be better equipped to decide which organizations align with your giving goals. The following article is in reference to operating budgets and should not be confused with endowment funds that are accumulated, invested and held in perpetuity the income from which is used to fund the organization. Not-for-profit organizations should aim to have an operating reserve ratio of no less than 25 percent, or enough to cover at least three months of their annual expenses.

By getting one or more major https://nerdbot.com/2025/06/10/the-key-benefits-of-accounting-services-for-nonprofit-organizations/ funders to cover administrative costs, some charities claim to other funders that “100 percent of this donation will go to our programs” when soliciting donations. Another popular ratio employed by the rating agencies involves a “program expense” calculation. Internally, when used as baseline, minimum performance criteria, the financial ratios used by watchdogs have been proven to be generally valid guideposts. A failure to meet these benchmarks should set off warning bells for an executive director or board members and lead to an analysis of your organization’s spending and financial presentation. There may be valid reasons why your organization is not generating the same numbers as other charities, but knowing how and why is key. By becoming familiar with the ratios, the rating agencies and their reports, managers can benchmark their organization’s performance against that of other charities in their community, field or revenue bracket.

what percentage of a nonprofit budget should be fundraising

How to Use Donor Acquisition Rate

Lack of personal relationship — One of the most common reasons that fundraisers fail is that they haven’t established a relationship with the donor. Negative characteristics portrayed — If something is said or done that runs up the “red flag” for the donor, the fundraiser will most likely fail. The best-paid 25 percent made $78,990 that year, while the lowest-paid 25 percent made $45,170. The IRS generally requires a minimum of three board members for every nonprofit, but does not dictate board term length. Ideally, nonprofit groups should strive to have at least 90 to 180 days cash on hand, recommends the Forbes Funds. In the absence of a standard definition, let’s consider a small organization as having 20 or fewer staff members and a large organization as having 100 or more.

what percentage of a nonprofit budget should be fundraising

Who Is Involved in the Nonprofit Budgeting Process?

what percentage of a nonprofit budget should be fundraising

I won’t sugar coat it–this is confusing stuff when you’re new to budgeting! This question is the one that people tend to get most hung up on; there’s been so much buzz around nonprofit overhead. Let’s explore the nonprofit budget and some of the most common metrics, the widely accepted targets, and where the wiggle room is. The needs of a food bank are different from a community & economic development organization and from a performing arts nonprofit. Fundraising is critical for a nonprofit to succeed, so finding ways to make this work more efficiently and productively helps every organization — and board.


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