This page does not attempt to cover all these issues, but rather to validate how important it is to compensate employees fairly and debunk the myth that “nonprofits only have volunteers.” Also starting this month are hikes in the minimum wages of 21 states, as well as even more significant hikes in 48 cities and counties, mostly in California, Colorado, and Washington. You can learn more about this in detail from the Economic Policy Institute.
Tools for Boards
The main budget you’ll create is your operating budget, which details the costs you’ll incur and the revenue you’ll generate over the next year. Whatever you pay your executive director, it’s a good idea to have the salary reviewed and approved by the board annually, preferably in the context of performance evaluation and the budget for the upcoming year. The simple step of assigning one person to look up the salaries of comparable organizations can set a helpful context for the board. The importance of compensation to nonprofit employees cannot be overemphasized.
- Despite the press about excessive compensation, nonprofit boards are more frequently worried that they are paying their executives too little.
- Although the IRS does not have rules on how much a 501c3 can spend on overhead, spending more than 35% on overhead could hurt your credibility and drain funds that should be going toward your programs.
- The process of creating a nonprofit budget is similar to the process of creating a budget for any other type of business.
- This question is the one that people tend to get most hung up on; there’s been so much buzz around nonprofit overhead.
- Focus on proven strategies for retaining the supporters you have and gaining new supporters.
- Following frustrating pandemic-related delays, the IRS released around a million Form 990 files in May 2023, providing crucial data to offer a more complete picture of nonprofit compensation.
Have a strategy and a plan in place that’s right for your nonprofit
Nonprofit HR hosts dynamic educational, networking and collaboration events designed to explore the critical talent and culture issues facing the nonprofit sector. Location also remains a key factor when it comes to median executive compensation. Nonprofit organizations in the Midwest have the lowest median executive compensation compared to all other U.S. regions. Organizations located in the Northeast have the highest— with District of Columbia being the state with the highest median compensation overall. If your nonprofit has a broad base of small donor support, accounting services for nonprofit organizations is your strategy to find new donors through marketing campaigns, or to connect with major donors in your community through events, personal calls, or meetings? Maybe your development shop has the capacity to do both of those at once – expand small donations while creating a major donor program – or maybe it makes sense to focus on one, and then the other.
- The decisions you make about revenue and expenses should always align with your organization’s goals and the impact you’re striving to achieve.
- Nonprofit organizations in the Midwest have the lowest median executive compensation compared to all other U.S. regions.
- On the other hand, many nonprofits struggle to give adequate compensation to their employees due to infrequent cash flow and tight operating expenses leading to high employee turnover.
- This means that they have more income than they do expenses, which is a good position financially.
- Charity Navigator generally gives the highest rankings to those organizations whose ratio of program expenses is 85% or higher of their total expenses.
A Guide to the 2022-2023 Compensation Landscape
Learn more about Candid’s 2023 Nonprofit Compensation Report by visiting this webpage and downloading a sample report. Now that you know what should be included in your nonprofit budget, it’s time to start creating one. The process of creating a nonprofit budget is similar to the process of creating a budget for any other type of business.
Nonprofits by the Numbers
- Every nonprofit’s business model is unique, but you can often glean insights from seeing how similar organizations are putting it all together.
- Beyond mapping out your expenses and revenues, this financial plan also helps you monitor your organization’s activities and ensure you use your funds wisely to support your mission.
- So many new nonprofits rely on small, sporadic individual donations and fundraising events (that could get canceled at any time due to health concerns).
- The needs of a food bank are different from a community & economic development organization and from a performing arts nonprofit.
- If your nonprofit has a broad base of small donor support, is your strategy to find new donors through marketing campaigns, or to connect with major donors in your community through events, personal calls, or meetings?
- In a national study of nonprofit executive directors, most were reasonably satisfied with their compensation, despite salaries often between $40,000 and $60,000 in some of the country’s most expensive urban areas.
It’s important to strike the right balance between spending enough money on fundraising to be successful, but not spending too much, especially on strategies that don’t pay off. For example, if you’re looking to scale your programs, you need to scale your fundraising efforts. In their first year, as they build new fundraising programs, the return on that investment might be $100k. For example, a nonprofit may give fundraising employees bonuses based on their ability to achieve or exceed fundraising goals.