For a nonprofit organization, donations are very important. Collecting a significantly useful amount of funds from recurring donations is the primary target of every nonprofit organization if it wants to survive and succeed in its goal of serving humanity at large.
However, while donor sustainability is important to nonprofit organizations, the cost incurred in achieving this objective is the other side of the coin that cannot be ignored.
But what do these costs include and why is it important to take them into consideration?
Read on to find out.
What are fundraising expenses?
As the name implies, fundraising expenses are the costs incurred by nonprofit organizations in planning, organizing and implementing activities or other events to generate funds for its social projects.
Why do you need to record fundraising expenses?
Every for-profit business produces an income statement each year, which needs to be submitted to the required authorities for fulfilling the legal obligations.
Because the principles of operation are different for a normal company and a nonprofit organization, the latter is required to submit a statement of activities.
This includes the revenue earned in the form of contributions, grants, and donations, to name a few. The statement also needs to report the expenses incurred by the organization in its management and operational processes. Moreover, these expenses have to be categorized according to their function.
Fundraising is one of the categories for which the expenses have to be listed as appropriate.
Examples of fundraising expenses
Fundraising expenses primarily include the following activities.
Advertising the fundraising campaigns
Advertising any fundraising campaign includes preparing and printing the relevant material and then distributing it amongst the target audience as well.
If you are conducting a fundraising program, then you will obviously need to bring it to the public eye. This means using certain marketing tools such as brochures, leaflets, flyers, and any other promotional as well as informational material.
Communicating with the donors
There are only a handful of things in this world that are available for free. Indirect communication is definitely not one of them.
Whether you publish the call for funds in a newspaper or a magazine or inform the guests via email or invite them over the telephone, you incur costs in every way.
Conducting the fundraising campaign
For this, you might install a booth at a roadside or visit different institutions to request for funds. Or you may also host a formal gathering or even a dinner for the recurring donors to update them about your projects and how and where their offerings are being put to use. Although this means huge expenses for the organization, nonprofits undertake such strategies nonetheless because it encourages benefactors to continue donating.
What it does not include
There are two types of costs that despite being related to fundraising programs are not included in the fundraising expenses.
1. Cost of accounting
Costs of accounting for the contributions made by the donor are included in administrative costs.
2. Cost of direct benefits
Services or goods provided to the attendees, donors or volunteers at a fundraising campaign are usually included under the program expenses. For example, food served to these people and any promotional items or souvenirs gifted such as key chains, mugs or t-shirts are a part of program expense.