PROFIT ACCOUNTING MINDSET FOR NONPROFIT ORGANIZATIONS 3: Strategies

An organization (whether for-profit or nonprofit), if it wants to continue in operation, must maintain a mindset which strives to be profitable –i.e., revenues exceeding expenses and cash inflows exceeding cash outflows.

The particular items, to which the nonprofit organization’s principals and managers must pay particular attention, include:

In the Balance Sheet

Donations and Contributions Receivable

Inventory of items for sale (e.g., publications, etc)

Property & Equipment for possible rentals

In the Income Statement

Fees from seminars & workshops

Publication Sales

Commissions / Royalties / Fees for services

Interest Income (are the organization’s Fund Balances adequately managed for minimum risks & optimum earnings?)

In the Expenses portion of the Income Statement

Is the organization availing of Donated Services to meet some of its manpower requirements?

Are the Direct Costs of programs & activities less than the Revenues from these programs & activities? Otherwise, the organization will back itself into a corner where the more successful it is in the quantity & quality of its programs & activities, the more it is depleting its Net Assets. The counterpart situation for a for-profit organization would be: the more you sell, the more you lose.

In the cash Flow Statement

Is there a program for timely follow-ups of pledges and donations/contributions receivable?

Are Days Payable (for Accounts Payable) less than Days Receivable (for pledges and donations/contributions Receivable)?

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