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Tips for Managing Nonprofit Overhead Expenses

Overhead expenses are an issue for any business plan. Imagine if a nonprofit organization spent 80 percent of its revenue on fundraising events and 20 percent of its revenue on supporting its causes and clients. Donors would quickly question whether they were contributing to a charitable group or to a fundraising engine.

The bottom line is that you want to keep your expenses in line. Whether you’re talking about office rent, supplies, advertising and promotions, or the budget for your next fundraising event, watch your costs like a hawk:

  • Be sure your overhead matches the standards that donors expect from charitable organizations.

  • Keep your spending to the lowest possible percentage of your organization’s income, aiming for a number under 25 percent.

  • Let your expenses climb at your own peril. Organizations like the Wise Giving Alliance (formed when the National Charities Information Bureau merged with the Council of Better Business Bureaus Foundation) provide donors with reports on the charitable performance of soliciting organizations.

    Their guidelines stipulate that member organizations spend at least 65 percent of funds raised on program activities, keeping overhead to less than 35 percent. Even small organizations are wise to adopt similar ratios.

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