Where does your non-profit organisation (NPO) get its funding from?
Recent research carried out by Sage Foundation and Charity Digital, in consultation with Solid Base Non-Profit Support, shows that most organisations (36%) get the majority of their funding from mixed sources.
These might include regular donations or membership fees, but will most likely include grants as a result of applying for funding.
In fact, 14% of those surveyed said grants constitute the majority of their funding, while 20% said they get the majority of their funding from public fundraising.
What are NPO sources of income?
The difference between fundraising and grants, of course, is that the latter are irregular and intended to fulfil a particular purpose.
That purpose might be capital expenditure or, more typically, financing a project or outreach. Almost always, this kind of funding comes with strings attached at various stages — including impact reporting requirements once the money is awarded.
Applying for funding as an NPO can be fiercely competitive. To ensure more bids are won than lost, it’s necessary to develop a strong skill set when it comes to completing applications and making in-person presentations.
Nobody said running a charity or NPO was easy and, in many ways, it’s much harder than running a traditional business.
One thing is sure, though. A charity or NPO with poor financial management will face an uphill struggle to inspire confidence in funding bodies.
Because organisations have to be accountable to the high standards of both donors/members and their trustees, poor financial management can be actively damaging — or even destroy the organisation.
You’ll need to demonstrate a full understanding of your organisation’s finances, and be able to prove — via the regular production of reports and using the correct accounting methods — that you’re always on top of things.
Types of funding available for non-profits
You can monitor funding opportunities and see if any fit your organisation and its aims, or you might create a project and see if you can find funding to support it.
Both approaches are necessary because of the way funding works. Some funding is very restrictive. Other funding less so.
One thing is key, though: it’s less likely you’ll find funding simply to cover everyday running costs such as rent or bills.
Instead, funding is often more about supporting individual projects or particular aspects of what you do.
Yes, this might keep the lights on for the duration of the project, but it’s vital to understand how funding bodies view the reason they hand out the cash.
Funding can come from a variety of sources, including but not limited to the following:
Funding from the public sector
Within the UK, a significant source of funding is the public sector – all the way from certain government departments through to local authorities and the Arts Council.
Perhaps it’s obvious, but these sources of funding are likely to align with existing government initiatives, such as improving mental health or childhood education.
Funding from trusts, foundations and charities
Then there are well-known and less obvious charitable sources of funding that exist solely to gather and distribute money to causes with which they align. such as particular demographics, areas or other factors.
Yet despite this, these forms of funding can be less narrowly focused compared to that coming from the public sector.
Examples abound. Most of us know about the Prince’s Trust or the BBC’s Children In Need and Comic Relief. But some examples of lesser-known sources include the Yapp Charitable Trust or The Tudor Trust.
Some larger charities even provide their own funding for other charities.
Funding from businesses
Some businesses provide funding too. These might broadly align with the business’ aims, but they typically support one of the business’ corporate social responsibility (CSR) initiatives, such as environmental activism or community action.
Sage Foundation encourages colleagues to both volunteer their working time and also donate to community causes important to them.
Across 2019, over 31,000 hours of working dates were spent volunteering by Sage colleagues, and £549,000 of donations were raised.
Meanwhile, 292 grants were awarded to not-for-profit organisations.
Funding from the National Lottery
One of the biggest sources of funding across the UK comes from the National Lottery, which provides funding for projects in the arts, sports, charity, voluntary, health, education, environment and heritage sectors.
It distributes the funds via four main organisations:
- Arts Council England
- National Lottery Heritage Fund
- UK Sport
The latter is only available to organisations in Scotland, of course, and this is perhaps a key part of both the National Lottery funding and grant funding in general.
The devolved assemblies in Scotland, Wales and Northern Ireland offer unique funding opportunities, and there are unique funding opportunities in England too.
Some sources of funding might be extremely regional, such as those in the town or village where you’re based, such as legacies or memorials for individuals.
Understanding your finances before seeking funding
A key part of successfully applying for funding stems from sound financial management. Understandably, those supplying the cash need to rest assured that the money will be spent as you’ve agreed.
Additionally, as you build a relationship over time with a funder, you’re likely to approach them again. If you’re unable to demonstrate the previous occasions went well in terms of finances, then you might be limiting your opportunities.
In your application for funding, you’ll want to agree on a plan to monitor the activities once the cash arrives, and this may involve providing accounting information or even opening up your finances to external verification, such as an audit.
All of this indicates why staying on top of finances at all times is vital — even if this can be difficult. NPOs and charities typically have fewer back-office resources than most businesses, and financial management can be correspondingly more difficult.
There is a solution.
Technology is an amazing equaliser that means charities and NPOs can achieve the same kind of efficiencies as even the biggest corporate business.
Using the right integrated software can shave weeks off the reporting cycle, for example, freeing up much-needed resources such as budgets and staff time.
Receipts can be recorded easily using just a mobile phone, while invoice payments can be chased up with just one click.
Donations or membership fees can be monitored and it becomes easy to spot lapsed accounts — and make fresh contact to encourage re-engagement.
Government guidelines exist to make it easier to be able to demonstrate sound financial governance. These don’t necessarily apply only to larger organisations.
For example, the government’s charity accounting framework says charities or NPOs should aim to produce a yearly trustee’s report, a set of accounts, and an annual return.
These are required for organisations registered with the Charity Commission but are simply good practice in any event and certainly useful tools for funding applications.
The framework discusses other ‘must’ and ‘should’ accounting requirements.
Again, using accounting and other business management software makes producing accounting summaries and reports little more than the click of a button, especially if the software has been engineered specifically around charities and NPO commitments.
It’s also wise to register with or certainly abide by the guidelines laid down by the Fundraising Regulator. These apply to all kinds of fundraising and not just applying for funding or grants.
Steps to take when applying for funding
Step 1: Find the funding you wish you apply for
Tools such as Funding Central can be used for this, and there’s also a subscription service offered by the Directory of Social Change. But, as you’ll find, there are hundreds if not thousands of opportunities available.
Additionally, there isn’t a standardised way to apply. There’s no equivalent of the job-hunting curriculum vitae that you can email to be in with a chance.
You should aim to create a “best practice” approach to applications. Doing so brings the best chances of success. For example, taking a targeted approach can help, in addition to being confident in your organisation’s financial management, as discussed earlier.
A targeted approach with just a handful of applications is almost certainly more likely to pay dividends compared to a scattergun approach. You could start with a long list of possibilities, but aim to reduce it to a (very) short list.
Step 2: Check the small print
Each funding application requirement needs to thoroughly understood and this can involve digging down into small print.
You should also take a deep look at the funder’s core mission to see how well your organisation aligns to it. Previous projects and organisations they’ve supported can provide clues too.
Step 3: Complete the application
Depending on what’s being awarded and the funding organisation, this could involve little more than completing a form, or it could involve putting together an entire presentation.
It’s important to provide what’s asked for, but only to provide this and nothing else.
For more complicated funding applications, you’ll need to outline your budget. This is why always having up-to-date accounting makes sense.
It means that with just a few clicks, you’ll be able to plan likely staff costs or expenditure.
In describing the activities in the case of an application for a specific project or outreach, you should focus on milestones that lead to a defined outcome, expressed in the terms of your core mission, such as “A 20% reduction in childhood obesity in your community via sporting events to be held every weekend.”
Within the application, your core mission should be described in terms of this outcome, which is to say, you should relate the project directly to your cause and the recipients of your work.
Making a success of applying for funding
Both seeking and applying for grants or other kinds of funding can be a full-time job and, indeed, there are freelance bid writers you can hire who specialise in nothing else. They take a cut of the cash, but that might be a price worth paying.
It might feel as if the problem of managing your organisation’s finances (and finding funding) is tough to resolve, but the solution can be simple and manageable with the right approach, time investment and technology..
The use of modern, cloud-enabled finance software really will revolutionise how your organisation functions, freeing up staff time for more of what you care about — the core mission that drives you forward.