Accounting for Fundraising Expenses
Fundraising Expense is the nonprofit organization expenses that are used to support the fundraising activities such as fundraising mailing, events, and staff costs.
These events are the opportunities to bring in new donors and increase donations. They range from mailing campaigns, marathons, or golf-related functions like dinners & galas where proceeds go towards unrestricted funds that can be spent on anything we want.
A non-profit organization is an organization that does not aim to make a profit but rather focuses on achieving its goals and objectives. Non-profit organizations are usually set up for charitable, religious, or educational purposes. Many non-profit organizations receive funding from governments, foundations, or other donors. Some non-profit organizations also generate income through membership fees, grants, or fundraising activities.
Many nonprofits rely on raising money for their operations. They also have several other ways that can use to raise funds. It includes annual events or membership drives to generate revenue from donations made by individuals who want to help its mission statement become reality. Nonprofits often need cash infusions at times when there isn’t much going out; this might include expenses related to operating costs, program services provided, and so on.
The expenses incurred to raise funds for your non-profit organization are a necessary part of doing business. This can include things like printing materials, hosting events and booths at conferences or gatherings, etc. Please refer to the example of the fundraising expenses below:
- Fundraising events or activities
- The payroll expense that is paid to the staff works directly with such kinds of events.
- Direct mail campaigns
- Printing costs
- Costs related to fundraising events
- Compensation for workers
- Travel expenditures and accommodation related to fundraising
Some donors will only donate to an organization if they feel like the fundraising costs are being tucked away in a corner. The ratio of what you spend on raising money versus how much comes back is important for any nonprofit group.
Non-profits are turning to events for the purpose of raising funds. As with any other way, it is important that they have accurate financials and reports on how much revenue was generated by these activities in order to show relevance when submitting them later down line.
Journal Entry for Fundraising Expenses
The fundraising process costs should be considered part of your overall marketing strategy. These include direct and indirect expenses related to events. They include printing tickets or posters for attendees, sending out mailings with information about what you’re doing, and paying public relations firms who work on behalf of organizations.
The journal entry is debiting fundraising expenses and credit cash paid.
One nonprofit prepare an event that cost $ 50 per person. During the event, there are 1,000 attendees and each of them agrees to donate $ 500 to support the entity’s activities. Please calculate the fundraising expense and revenue to the nonprofit.
The nonprofit has prepared the event and received donations of $ 500,000 ($500 * 1,000 donors) from all donors. However, they have to spend $ 50 for each donor to attend the event. This is the fundraising expense that entity has to bear and record as an expense.
Fundraising expense = $ 50 * 1,000 attendees = $ 50,000
The nonprofit has to record the fundraising expense in a separate account on the financial statement. The journal entry is debiting fundraising expense $ 50,000 and credit cash $ 50,000.