To run a successful nonprofit organization, every staff member and volunteer needs to understand how their work furthers the mission. Yet at many nonprofits, fundraising and finance departments often find themselves at odds with one another.
These misunderstandings typically stem from differences in financial reporting and goal setting. Accounting and finance teams can only report on the money that's actually received, while fundraising teams often record pledges as revenue. Fundraisers focus primarily on securing as much funding as possible, while finance departments ensure that money gets allocated according to the budget's greatest need.
How can you help integrate your finance and fundraising teams successfully? Here are five strategies nonprofit leaders use to align these critical functions:
- Use your fundraising data to craft your budget
- Create sustainable revenue sources to raise funds
- Sync up between your fundraising and finance teams
- Review financial information on a regular basis
- Leverage financial information for better donor relationships
Especially as the end of the fiscal year approaches—a time of increased stress on both teams—understanding how fundraising and finance overlap is essential for organizational success.
Use your fundraising data to craft your budget
Toward the end of the year, your fundraising team will be busy crafting a case for support to maximize donors' year-end generosity. Meanwhile, your finance team will ensure everything is in order for tax season, create the budget for next year, and allocate enough funding to cover both overhead expenses and programs.
For each team to accomplish its objectives, there needs to be an open line of communication between them. A strong fundraising strategy requires your fundraising team to provide the finance team with reports on:
- Amount of sustainable revenue from monthly recurring donations. These tend to be more predictable, helping the accounting team create more accurate budgets. Each donation contributes to financial stability.
- Historical year-end giving numbers. This helps the finance team forecast revenue during the year-end giving season and supports financial planning efforts.
- Unfulfilled pledges throughout the year. Because fundraising and accounting teams record pledges differently, open communication about which ones remain unfulfilled helps both teams understand discrepancies in their reporting.
With these reports, the finance team can develop a more accurate budget based on the likelihood of receiving funds raised throughout the following year.
For example, monthly giving programs have higher retention rates—around 80% for the first year and 95% after five years. The average first-time donor retention rate is only around 20%. Understanding these differences in retention rates allows the finance team to more effectively plan for revenue.
Create sustainable revenue sources and raise money for your nonprofit
As noted above, recurring donations are much more likely to be retained over time. Your finance team can count on them as a sustainable source of funding as they plan for future revenue generation. Many nonprofits find they need to raise capital from multiple sources to achieve their goals.
Fundraising teams can help further the organization's financial growth by promoting sustainable revenue sources. To do so, fundraising teams can:
- Push for more monthly donations from donors. Leverage multi-channel marketing to promote a monthly giving campaign, showing supporters the value of consistent giving over time. Add an option to turn a one-time donation into a monthly gift directly on your nonprofit's donation page.
- Focus on stewardship and appreciation. Better relationships with donors encourage higher retention rates overall. Develop intentional donor stewardship strategies to make supporters feel involved and appreciated—they're much more likely to become longtime supporters.
- Develop relationships with local businesses. Seek out businesses with established corporate giving and philanthropy initiatives that align with your mission. A corporation may build partnerships that provide ongoing sponsorships and support.
These revenue sources become especially valuable when given as unrestricted funding. Unrestricted revenue provides more flexibility for your organization to allocate resources as needed rather than according to donor-imposed restrictions. When developing relationships with supporters and businesses, explain the importance of unrestricted revenue and encourage them to give without restrictions. Some small businesses may even want to invest in your cause through ongoing partnerships.
Sync up between your fundraising and finance teams
To better understand one another's goals, your fundraising and finance teams should meet regularly to sync up. This provides a chance to reconcile data and address discrepancies, ensuring everyone is on the same page about current revenue. An experienced advisor can help facilitate these conversations when needed.
Often, discrepancies between fundraising and financial information come down to reporting methods. When reviewing reports, ensure both teams understand the key differences in reporting for various revenue sources:
- Grant types. For accounting, different types of grants are recorded in different ways. But for the fundraising team, grant funding may be recorded all at once when it's awarded.
- Pledges. Fundraising teams often record pledges as revenue, while your finance team needs to wait for those pledges to be fulfilled before recording them.
Recording revenue is straightforward when you raise money online through a donation platform—the fundraising process is largely automated. However, it becomes more complex for your accounting team as they manage various restrictions, installments, and unfulfilled pledges. Your fundraising and finance teams need to understand each other's reporting practices to minimize confusion.
Consider this scenario: You're a fundraising professional who reports a revenue number to your executive director, but your finance director provides a different number. This could make both departments look unreliable. Syncing up and coming prepared to explain discrepancies ensures everyone stays aligned and maintains strong governance practices.
Review financial information on a regular basis
Everyone at your nonprofit should understand the organization's financial standing at any given time. To keep everyone updated, set standing meetings every quarter to sync up with the entire team about how the organization is doing financially. It's especially important to compare actual expenses with the budget during these check-ins.
Complete a finance check quarterly, and perform an annual review where your organization goes over the information needed for your IRS Form 990. Working with credit unions or a reputable bank can also help secure better financing options for your organization's needs.
If anything in your finance check looks off, dig deeper into individual data points to identify the source. Some underlying causes for discrepancies might include:
- Paying unplanned overtime to employees (easily identified with time tracking software)
- Programs that are more expensive than initially anticipated
- Campaigns that aren't performing as well as expected
- Unexpected fees associated with your business bank account
Once you identify the source, you can take action to bring your organization back on track. For example, if campaigns aren't performing well, review your online donation page conversions and optimize accordingly. Track each milestone to understand where improvements are needed.
For nonprofits managing grant-funded work, maintaining accurate financial records is especially critical. Funders demand proof of measurable impact, and incomplete records raise audit risk and threaten future funding. According to the National Council of Nonprofits, fundraising is a heavily regulated activity that requires careful documentation and compliance with all terms and conditions.
Leverage financial information for better donor relationships
It's easy to find ways your fundraising team can support your finance team. But what about the other way around?
The information your finance team collects can help your fundraising team develop stronger relationships with donors. Your company's approach to transparency can make donations tax deductible and more appealing to supporters. Leverage financial information to support relationship development in two key ways:
- Follow up after campaigns. Providing financial updates to donors is essential for any fundraising campaign. Provide updates to volunteer fundraisers during a peer-to-peer campaign to motivate them to continue raising funds. Follow up after the campaign, telling them how much you raised and how that money will be used to drive your mission forward. This allows donors to see real impact on your nonprofit's finances and helps each fundraiser feel valued.
- Provide annual reports to donors. Annual reports summarize your organization's financial information specifically for donors. These updates create transparency by showing donors exactly where their contributions go and provide support for continued charitable giving.
The more transparent financial information you can provide to your donors, the stronger the relationships you build. Being strategic about what you share helps maximize engagement.
Exploring alternative funding sources for nonprofit investment
Beyond traditional donations, nonprofits can explore diverse funding streams to strengthen financial stability. Understanding how to fund your programs through multiple channels creates resilience.
Consider these additional funding approaches:
- Grant funding. Federal programs through the SBA and other agencies offer grants for qualifying nonprofits. Develop a detailed business plan that outlines how funds to start new programs will be utilized.
- Crowdfunding campaigns. Online platforms allow you to raise funds from family and friends as well as new supporters. Crowdfunding works particularly well for specific projects with clear, measurable outcomes.
- Impact investors. Some investors seeking social returns may provide equity or debt financing for nonprofit ventures. Angel investors and private equity investors increasingly support mission-driven organizations, though this sector requires careful navigation of terms.
- Earned revenue. Many nonprofits generate income through products and services aligned with their mission. This creates liquidity without obligation to repay external funders.
When seeking capital from investors or exploring private equity options, investors want to know that your organization has strong governance and clear plans for scalability. Venture capitalists typically focus on startup ventures, while venture capital firms may have sector-specific interests. In the U.S., some firm structures allow nonprofits to attract investment while maintaining their charitable status.
For organizations looking to start a business venture or social enterprise, consider how much funding you'll need for your first round. Some choose to bootstrap initial efforts before seeking external capital. Whether you're working with a lender for traditional financing or exploring equity options, having expertise in financial management helps you get the best terms available. Understanding interest rates and deal sizes helps nonprofits negotiate effectively and accelerate their growth.
Why fundraising and finance alignment matters for your mission
When fundraising and finance teams operate in silos, nonprofits face real consequences: budget overruns, cash flow problems, and strained donor relationships. Alignment between these departments creates a foundation for organizational stability and growth. Effective fundraising solutions depend on this collaboration.
Consider tracking how staff time is allocated across programs and administrative functions. This provides finance-ready data that supports both grant reporting and strategic planning. Many nonprofits find that implementing time tracking for nonprofits helps bridge the gap between fundraising promises and financial realities—ensuring that when you tell funders their dollars support direct services, you have the audit-ready records to prove it. Strong stakeholder relationships depend on this transparency.
Despite frequent opportunities for misunderstandings, fundraising and finance work together in important ways to ensure your nonprofit runs effectively. Whether your organization is looking to invest in new programs or secure funding for existing ones, these strategies help both teams understand how their departments benefit one another and work together to support your cause.
