Most companies are in business to make a profit. But what about non-profit organizations? Why do they exist? Where do they get an income to pay their employees and carry out their missions?
A not-for-profit organization is usually inaugurated to address a social cause, such as hunger in Ethiopia. Hospices are designed to help people with terminal illnesses to die with dignity and proper care, sometimes in their homes, and other times in special hospice institutions. Some non-profits drive education programs, such as ensuring that every child has books to read.
These are just a few examples of non-profits. We look at how their finances work.
Donations
Non-profit organizations get donations from many sources. Some philanthropists look for charities that they feel strongly about and make what often amounts to huge donations. Alternatively, members of the organization will seek philanthropists out and request money by highlighting their visions and missions.
Non-profits make calls to lists of people that they get out of their email lists. Sometimes, they will work through the telephone directory, asking strangers to make a donation. They will also send out newsletters and have copies available at various outlets where people might be inclined to take a newsletter home and decide to donate some money. Businesses sometimes look for charities to donate to so that they can qualify for a tax benefit.
Grants
A non-profit organization is allowed to apply for grants. The government gives out many grants for all types of non-profits. There are also private and business grants. An individual may set up a grant to support cancer research, hospices, or other non-profits who act to lessen the mortality rate of the disease. This is usually done to commemorate a loved one who died from cancer (or some other condition).
Membership
A membership fee is a type of donation. The non-profit will reward people who have played a pivotal role in helping the organization by granting them a membership that requires them to pay a fixed amount monthly or annually. Some donors donate to gain membership.
Fundraising
There are many ways to fundraise. Here are some easy fundraising ideas to get you started. Hospices have a fundraising model that relies on donation of items such as used clothes, books, CDs, kitchenware, knick-knacks, etc. These are cleaned, priced, and marked, and then sold to the public who visit their premises, or on fair days, or at other events.
Salaries
Salaries are paid from the money received from donations, grants, membership fees, and the sale of donated items. Non-profits also make use of volunteer workers. The latter do not receive a salary.
The law allows non-profits to pay salaries provided they meet the guidelines. Firstly, they must comply with minimum wages. Secondly, the amount paid must not be excessive. Although non-profits have to compete with other sectors for employees, their salaries are typically lower than for-profit businesses. Thirdly, any executive income must go before the organization’s board members to be ratified.
Non-profits can make a reasonable income to cover their expenses and salaries. However, the goal is to make enough money to carry out initiatives aligned to their mission statement. They need to serve the groups they were established to care for.
