Without a predictable revenue stream, you’ll have a hard time budgeting, funding priorities and planning for the future. Right now, many organizations are grappling with sudden federal grant cuts. If this is your nonprofit’s situation — and even if it isn’t — you should assess your revenue streams between audits using the same techniques professional auditors employ.
Assess past sources
Begin the process by comparing donation and grant dollars raised in past periods to identify trends. For example, have individual contributions been increasing over the past five years? What campaigns have you implemented during that period? You might go beyond the totals and determine if the number of major donors has grown.
Make sure you estimate what portion of contributions is restricted. If a large percentage of donations is tied up in restricted funds, you might want to re-evaluate your gift acceptance policy or fundraising materials.
Grants can vary dramatically in size and purpose ― from covering operational costs, to launching a program, to funding client services. Did one funder supply 40% of total revenue in 2022, 50% in 2023, and 65% last year? Even if you’re still receiving grant money from this funder in 2025, such reliance on a single funding source is a red flag to auditors. It should be to you, too. If funding stopped, your organization might be forced to close its doors.
Other types of income
Fees paid by clients, joint venture partners or other third parties can be similar to fees that for-profit organizations earn. They’re generally considered exchange transactions because clients receive products or services of value in exchange for their payments. Sometimes fees are charged on a sliding scale based on income or ability to pay. In other cases, fees are subject to legal limitations set by government agencies. You’ll need to assess whether your services are paying for themselves.
Also, if your nonprofit is a membership organization and charges dues, determine whether membership has grown or declined in recent years. How does this compare with your peers? Do you suspect that dues income will decline? You might consider dropping dues altogether and restructuring. If so, examine other income sources for growth potential.
Challenges ahead
Although this is a challenging time to find new revenue streams that could enable you to replace lost grants or diversify your sources of income, opportunities exist. Contact us for ideas or if you need help assessing your income.
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