PROFIT ACCOUNTING MINDSET FOR NONPROFIT ORGANIZATIONS 2: Create earning assets

Like any other organization (whether for-profit or nonprofit) which intends to be viable over the long term, a nonprofit organization has to maintain a mindset which strives to be profitable –i.e., revenues exceeding expenses. Otherwise, the nonprofit organization’s net assets or fund balances will be depleted.

Tom Durso over at The 501(c) Files sees increased expenses for nonprofit organizations in 2008 and suggests that they should reach out to existing donors in new ways and to new donors for the first time.

My additional 2-cents worth is: consider a focus on and regard for creating earning assets equal to the pursuit of the nonprofit organization’s vision and mission. Without this focus, the organization will be in danger of phasing out. Donors are faced with the same problem of increasing expenses and business downturns. Usually, the first expense item that goes or is decreased in a potential donor’s Income Statement is donations and contributions.

It is necessary that a nonprofit organization is able to fend for itself in the face of decreasing donations and increasing operating expenses.

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