6 Types of Revenue in Nonprofits

nonprofit accounting nonprofits revenue Sep 14, 2022
Revenue in Nonprofits

Did you know there are six common types of revenue for nonprofits? And of those six, most nonprofits only rely on three?

It’s important to understand the revenue types, not just for reporting purposes, but also for ensuring your organization is tapping into all of the right revenue streams. Without a good idea of the many ways you can bring in revenue, you could be missing out on opportunities. 

Let’s take a closer look at the six common revenue types:

1. Donor Contributions

Donor contributions are the most common form of revenue for nonprofits. They range in size and typically do not require the nonprofit to do anything in return. 

One example of a donor contribution could be a $25 monthly donation. In this case, the donor gives $25 with no expectations attached and you’re free to use the money however your organization sees fit. 

Grant contributions from donors also fall into this category. They are more formal and typically come with restrictions like how and what they’d like the money to be used for. Even though you have to follow the grantor's guidelines, it’s still considered a donation. 

2. Fundraising Proceeds

People enjoy going to fundraising events and they are a great way to get money in the door. A plus side to fundraising events is that proceeds can be used for anything, like supplementing tuition, providing grants, and boosting the financial position of the organization as a whole. 

Fundraising events come in all shapes and sizes but at the end of the day, their goal is to improve outreach and show the community your organization wants to be a part of it. If the event also helps you bolster your budget, it’s a win-win!

3. Fee for Service 

Fee for service revenue should be thought of in terms of a school. Private schools are nonprofits and need to have money coming in one way or another to pay:

  • Staff
  • Teachers
  • Buildings
  • Playground equipment
  • Etc.

Tuition payments are considered a fee for services and help the school pay for their needs. 

Another example would be paying for tickets to attend a play or symphony. Nonprofit organizations often host these events and the admission should be considered a fee for service. 

4. In-Kind Donations

In-kind donations are donated hard goods or donated services. These will all be recorded in the books as both revenues and expenses based on their value. 

For example, let’s say an attorney, who specializes in nonprofits, gives you 20 hours of their time and chooses not to invoice your organization. You will still need to record this in your books as an expense and income because it is considered a donation of their time. 

Auction items are another example of in-kind donations. Let’s say you are hosting an auction and someone offers your their condo in Hawaii along with a car and a nice dinner. Since your organization is not paying for any of this but it holds monetary value, it is considered an in-kind donation. 

If your nonprofit is a food bank, food donations should also be recorded as in-kind donations. 

You’ll need to track: 

  • How much food is brought in
  • The types of food that are brought in 
  • The quantity/weight of the food that is brought in

View receiving a food donation is the equivalent of going to the store and buying the food to stock the shelves. It’s something you otherwise would have had to spend money on but didn’t because it was donated.

While recording in-kind donations as a revenue and an expense negate in the books, it’s still essential they are recorded.

5. Memberships

Chambers and rotaries are great examples of nonprofits that generate revenue from memberships. The organization will submit an invoice for a membership fee or dues and the money that comes in from that is considered revenue.  

In some cases, golf courses are registered as nonprofit organizations and membership fees are counted as revenue. However, since they are not 501c3’s membership fees at golf courses are not eligible to be considered a charitable tax deduction. 

6. Rent Subleases

Revenue from rent subleasing has become much more popular since the start of covid. 

Many organizations are partnering with other nonprofits to mitigate rent costs or generate revenue. Oftentimes, Nonprofit A will have a building and decide they want Nonprofit B or a business to move in and use the space they are not using. Nonprofit A generates revenue and oftentimes Nonprofit B benefits from lower rent costs. 

Have Questions About Your Revenue? 

Most nonprofits will see at least three of the six revenue streams we covered. However, this list is not all-inclusive and your nonprofit could also be seeing revenue from pledges, stock donations, collections, interest, and other revenue types. 

If you have questions about how your nonprofit should be recording its revenue or how it can diversify and tap into additional revenue streams, book an appointment with Morris Verdonk Accounting today!

Stay connected with news and updates!

Join our mailing list to receive the latest news and updates from our team.
Don't worry, your information will not be shared.

We hate SPAM. We will never sell your information, for any reason.