A non-profit organisation (NPO) otherwise known as non-business entity is an organisation that does not distribute surplus revenue to the organisation’s management in form of profit or dividends. The non-profit organisations use the surplus revenue to further its mission. Just like other business entities or organisations, non-business entities require funds to operate. How can they stay in touch with the cause, and yet not sell shares to the public? Not even investment shares.
The following are ways in which non-profit organisations stay in touch with the cause:
This is self funding from fundraising and individual contribution. Bear in mind that individual contribution is arguably the largest source of funds for non-profit organisations. NPOs can also organise for fundraising; however, the amount raised depends on the public relations efforts of the organisation.
The importance of bootstrapping is that collateral or repayment terms are not required since the funds are given out for free. Besides, there is no discussion of return to investment to the fund given.
Non-profit organisations own properties such as art centres, performance groups and buildings which can be rented. The revenues gotten from such operations are usually tax-free; however, if the organisation separately owns properties which it can rent, the rent revenue cannot be exempted from tax. Many organisations employ this method, as it is a relatively reliable source of revenue as compared to the other sources.
Selling products such as T-shirts, story books, novels and DVDs serve to raise additional revenue for non-profit organisations. The products sold by these organisations can be sourced from most manufacturers at a discount. Many non-profit organisations like sourcing the products they sell locally, owing to the fact that these products are cheaply available.
Non-profit organisations can borrow loans from individuals and financial institutions. This method is despised by most organisations due to the interest rate and collateral prerequisites required while obtaining loans. Nevertheless, the interest and collateral factors do not eliminate loans as a source of fund for non-profit organisations.
Royalties for non-profit organisations come from publications such as photo essays and cookbooks. Besides, most organisations publish documents about their organisations. For instance, a non-profit organisation focusing on domestic violence awareness may publish articles for counsellors. Royalties can also be sold through the sale of limited rights for use of the organisation’s photographs.
A private endowment is a source of revenue for non-profit organisations, which come in form of gifts and bequests. Most endowments however, come with a requirement that they must be invested for income generation to the non-profit organisation.