Practically everyone has heard the saying, “It takes money to make money,” and that phrase also rings true when it comes to fundraising for your nonprofit. Whether your organization is promoting an event, printing brochures for an upcoming campaign, or paying staff workers, fundraising expenses are a necessity when trying to attract donors.
Another aspect of running a nonprofit is how to account for these fundraising expenses. Accounting for a nonprofit organization is tricky enough, but knowing how to categorize expenses can be confusing and intimidating if you are not familiar with the process.
The following guide will give you a brief introduction to fundraising expenses and explain how to account for them while bookkeeping for your nonprofit.
In the nonprofit world, fundraising expenses are typically referenced in two ways:
- As a general way of referring to any costs related to raising funds for a nonprofit
- As one of the three functional expense categories (the other two consisting of program expenses and administrative expenses)
For this article, we will be discussing it as it relates to functional expense classifications.
Examples of Fundraising Expenses
The following activities are examples of expenses that would be categorized under fundraising expenses when accounting for fundraising costs:
- Direct mail campaigns
- Printing costs
- Costs related to fundraising events (silent auctions, fun runs, telethons, etc.)
- Compensation for event workers
- Travel expenditures related to fundraising
- Work staff training
- A portion of the Executive Director’s salary and benefits
How to Account for Fundraising Expenses
Now that you have a general idea of which tasks and activities are considered fundraising expenses, the next step for accounting purposes is to know how to record them on your Statement of Activities.
What Is a Statement of Activities?
In simple terms, this is a statement nonprofit organizations use to record revenues, expenses, and net assets after taking these factors into consideration. This financial report is also sometimes referred to as an Income Statement.
Where to Enter Each Fundraising Expense
Expenses related to fundraising are entered as a line item in the Expenses section of your Statement of Activities. See example below.
Tools to Help With Nonprofit Expense Allocation
Whether you are an accountant or an employee of a nonprofit that has been tasked with tackling the bookkeeping, the mere mention of functional expenses, Statement of Activities, and other nonprofit jargon can make the whole process seem quite daunting.
Fortunately, there is fundraising software available that is specifically designed for the needs of nonprofit organizations. Easily handle tasks like:
- Fundraising campaigns
- Expense allocation
- Statement of Activities/Income Statement
- Donor management
- Email marketing
- Online donations