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How to Operate Your Non-profit Like a Business


Whether it’s to help autistic children have access to tutoring or to provide affordable housing for the elderly, the mission of your non-profit organisation is the focus, and requires innovation and business savvy to make an impact.

We reviewed some of the unique distinctions of non-profits in our blog, Non-Profit Accounting and Tax Tips 101. But when it comes to similarities, the parallel between them and conventional business is the approach in which they are managed to provide value. This approach is what we want to focus on in this blog.

Whether a new organisation or well established, there’s plenty of tips here for all stages of a non-profit, so let’s go!


Why You Should Follow a Business Approach

There’s no getting around the fact that providing value, in whatever form or desired outcome, requires the same level of operational proficiency as a conventional business.

However, what is perceived as ‘value’ differs. A non-profit solves a problem with either a product or service, but the value it brings is providing a solution to a societal problem. Whether to feed the hungry or preserve wildlife, a donor’s gratification comes from knowing their investment is supporting the greater good.

In order to realise the greatest societal impact, non-profits must invest in their organisations, as any business would – if not more!

Everyone wants charities to spend as little as possible on overhead. That’s backwards. Overhead is what drives growth. If charities can’t grow, they can’t solve problems. So overhead is a good thing. And I’m overhead.” – Dan Pallotta, author


Key Components of a Business Approach

In our blog What You Should Know Before Starting a Non-profit in New Zealand, we emphasized that a ‘not for profit’ doesn’t mean ‘for loss’, and explained why you need to put your entrepreneur hat on. We said, “just like a regular business, if you run an efficient operation, you’ll be able to provide a much better service to the people or cause you’re trying to serve.”

A non-profit has accountability to both the community and donors, to operate in a way that meets revenue goals each year, without making unnecessary expenditures.

The following tips will ensure the best chance of making the greatest societal impact.

Act, Speak, and Perform Like a Business

It might seem obvious, but your attitude matters, and will determine your behaviour, choices and habits. Have a look at our blog, Ten Tips to Improve Your Habits and Business on how to disrupt and reboot behavioural patterns that might be holding your non-profit back. Operating it like a business will help cultivate relationships in your community, and develop win-win collaborations with donors or members.

Create Models of Sustainable Income

Donations are fabulous, until they stop. Investing in building stable revenue generating programs or services will ensure you’re not reliant on donor dollars or government grants alone. By making the mission profitable with revenue-generating services at the core of your organisation, you’ll have less dependency on philanthropy.

Understand the ROI

Track, analyse, pivot. Focus on short and long-term returns on investment to ensure your strategy and efforts are bringing in the greatest bang for your buck. Effectively working with the proceeds you have while maintaining expenditures within your budget is a result of responding to positive or negative ROI outcomes. Similar to conventional businesses, doing a costs and benefits analysis could help you to make better decisions on which activities and strategies to pursue.

Take Innovative Risks

Non-profit organisations are in the business of disrupting what is currently the norm, but also a problem to solve, and filling the role as ‘change agents’ to bring improvement to social issues. Making an impact will sometimes require taking calculated risks, which like any business, is necessary for making progress. Seek new ideas and opportunities, and assess short and long-term opportunities to scale.

Keep a Steady Eye on Expenses

Stay vigilant about what funds are not used efficiently. No matter what your income is, it won’t result in much impact if money is going down the drain. What could be trimmed, or donated? For example, evaluate what expense could be procured with a gift-in-kind campaign, to not only cut costs, but attract practical support and involvement from the community.

Invest Smartly

While monitoring expenses and the ROI as mentioned above, put your revenue to its best possible investment in the following areas.

  • Your Team. High quality staff results in a high quality organisation. Onboard the best talent for key positions, providing competitive benefits, salaries or hourly wages. Build a company culture that they love to work with, and take care of your people so they are invested in the success of your non-profit. Commit to building your leadership and teambuilding skills. You can learn how active listening can make a big improvement in this area by reading our blog, When Great Minds Don’t Think Alike, Exceptional Things Happen.
  • Marketing. It goes without saying that a polished presentation is a deal-breaker in todays’ society. The top necessities are a modern website that is easy to navigate, a solid brand that is unique and recognisable, local advertising, and social media presence. Newsletters, social media with engaged membership groups, and video marketing with a YouTube channel provide limitless opportunities for free marketing and visibility, so don’t skimp on keeping up with any of these activities in one form or another.
  • Technology and Equipment. Whether from donations, grants or raised funds, your technology and operational equipment needs to drive the engine of your non-profit. Make the most of free tools and software, but also have the mindset for growth and staying current.

Invest in the Right Accountant

We know that successful non-profits require a unified approach of building a solid foundation, measuring performance, having confidence in your decisions, and evolving strategically in the direction you want. Contact the team at BW Miller Dean to see how we can help your non-profit thrive.

Non-Profit Accounting and Tax Tips 101

People are yearning to be asked to use the full measure of their potential for something they care about. – Dan Pallotta, author

We continue our series on non-profit organisations, with tips to help you navigate the rewarding venture of running a charitable operation for a cause you’re passionate about. If your non-profit is still new, or you’re still considering whether to start one, read What You Should Know Before Starting a Non-Profit in New Zealand first. 

Now let’s look at the accounting and tax-related aspects that are unique to non-profits. Since the purpose, goals and needs of non-profits are different from those of conventional businesses, there are some aspects of their accounting that are handled differently too.  

Because the purpose of non-profits is to serve their cause, they are accountable to their supporters and contributors. The most important bit to understand is that there should be a money trail for all money that comes in and flows out of the bank account.  

Here are a few more tips that will help you run your organisation smoothly, and legally. 

Record All Your Income

You need to keep different sources of revenue separate in your accounts, because not only will it be easier to track and report on, but some income could be taxable.

Types of Revenue:

  • Donations – People donating to your organisation can get a tax deduction, so it’s both important to keep a proper record, and you need to send donees a receipt which they can include in their tax return.
  • Pledges – Some pledges could be conditional, like matching a future pledge from another donor, so track these accordingly.
  • Membership Dues – Subscriptions could be recurring monthly or annually and are usually for some type of service in return, like educational material in the form of magazines, webinars, or other events.
  • Special Events – These could include entrance fees to attend fundraisers or other occasions.
  • Grants or Other Lump Sums – There may be grants available from local or federal government agencies or from the private sector for your industry.
  • Volunteer Time and In-Kind Contributions – The donation of time and non-monetary services or goods also needs to be accounted for. This could be services from skilled professionals such as counsellors, tradesmen, marketers or bookkeepers, or someone gifting your organisation with a free piece of equipment such as a new computer.

Choose the Right Accounting Software

We don’t recommend you compromise when it comes to the engine that drives your accounting. Look for these must-have features:

  • Designed for Non-profit Organisations – Choose a package that features this customisation to handle the unique features that charities need, and even better, was developed with the input and recommendations of other non-profit entities.
  • Robust Reporting – Don’t settle for minimal features here, but look for the ability to track and report on multiple statistics that you can customise, such as debtor days, asset to debt ratio, expense cover trends, and liquidity graphs.
  • Supports Your Growth – Choose software that can grow with you and can be scaled up for extra add-on apps, additional users, or other features at a higher level of usage than what you might first start out with.
  • Other Handy Features – These could include donation tracking, donor management, third-party app integrations, and easily accessible customer support or FAQ forums.

We recommend using Xero for your accounting, with Spotlight Reporting for creating your monthly or quarterly reports. Xero has a great function to track different types of income and expenses with tracking codes, so you can report on each individual income stream separately. You need to set it up correctly from the start, so make sure you get in touch so we can help you with that. Spotlight Reporting has great reporting functions and a template specific to non-profit organisations, which we find useful.


What About Tax?

One of the great advantages of having non-profit status is that you don’t generally have to pay tax on your income, which will leave more money in your accounts to put towards running your organisation and providing a better service to your cause.

However, some forms of income are taxable. These include:

  • Business-related revenue, such as income from op shops (e.g. Salvation Army);
  • Investment income, such as interest on a term deposit, shares or real estate transactions.

Some non-profits could qualify for an exemption on the first $1,000 of taxable income from business activities or investments, so make sure you get in touch with us for more guidance.

Even if you have no taxable income, you will still have to file a tax return each year with the IRD, and you still need to deduct PAYE from your employees’ salaries as with any other job.


Do I Need to Register for GST?

As with for-profit businesses, if the income is above the GST threshold – if turnover is/or expected to be more than $60,000 in 12 months – you will need to register.

If you’re unsure whether you should register, or if you need help with registering and completing your GST returns, get in touch with us.


Partner With the Right Accountant

Operating a successful non-profit organisation requires professional support, as the reporting is distinct from conventional businesses. It’s vital to hire an accountant who not only understands your vision and goals and can give unbiased advice, but also understands the compliance and legal obligations specific to non-profits. Contact the team at BW Miller Dean to see how we can keep you on top of the finances in your non-profit.

What You Should Know Before Starting a Non-profit in New Zealand

The entrepreneurial spirit of business ownership goes hand-in-hand with the desire for making an impact on the world. What better way than launching a non-profit organisation?

Although getting started might seem overwhelming, it doesn’t have to be. If you want to start a non-profit, this post will guide you in what you should consider when creating your plan, with links to support your research. 


Step 1: Know Your Legal Obligations

A good starting place is to understand the legalities for non-profit entities and how that differs from conventional businesses.

Who Can Qualify? 

Whether or not your organisation will be granted non-profit status depends on a number of factors. Ask yourself:  

  • Purpose – what is its motive and purpose? For instance, do you want to relieve poverty, advance education or health, protect the environment, or something else? Learn more about determining your organisation’s purpose here.
  • Revenue – where will it come from? Will income be sourced from donations, membership fees, fundraising, grants or investment income?
  • Similar Organisation to Model After – are there other non-profits with a similar structure as an example to help your process? 

Documents and Structures

When applying for registration, the government assesses your organisation’s rules document.  The rules should satisfy the following criteria: 

  • they should be the legally binding rules for your organisation
  • they should clearly set out the charitable purpose
  • they should not assign powers that further non-charitable purposes, or profit any private or individual cause.

Continue learning more here.

Choosing an Appropriate Legal Structure

Incorporated or unincorporated? Accountable to many people or to a few? Whether social, charitable, sporting or otherwise, you’ll need to consider which legal structure will be most suitable. 

There are a number of different legal structures to choose from, and first you’ll need to determine what your organisation’s role in the community will be and how you intend to operate. Also, you need to consider the requirements in several key areas such as its size, culture and values, activities and other operational factors. Learn more about choosing the right legal structure for your non-profit here.

Register with the Companies Office

With no national association that governs non-profit organisations in New Zealand, your registration requirements will depend on the legal structure you choose. For example, organisations that qualify for registration under the Charities Act need to register with Charities Services

If you incorporate a company, society or charitable trust board, you need to register with the Companies Office

Register with IRD and Apply for Tax Exemption

As part of your setup process, you need to get an IRD number. From the 2020-2021 year, any person or organisation that wants to get or keep an income tax exemption must be registered with Charities Services. This tax-exempt status applies to business income used for charitable purposes in New Zealand. 


Step 2: Prepare to Launch

What’s next? Once you have your legal obligations sorted, you can start preparing for launch. Here’s where your vision, creative inspiration, and a bit of realism are needed for crafting solid plans.

Create a Business Plan

Without a well-thought-out business plan, you could have a harder time obtaining loans and grants, attracting corporate donors, or keeping your organisation on track. Even a simple one-page business plan helps you to polish your message. Also create a forecast, with a few different scenarios, to explore whether your plan is feasible. There are non-profit accounting programs available that can help you with this, and always seek help from your accountant at this stage to test your numbers and assumptions.

Create a Fundraising Plan

Get a clear plan of action for how you’ll raise money. This may include memberships, sponsorships, grants, or even selling products or services. A solid fundraising plan will get cash flowing in.

Explore Financing Options

As a non-profit, you may be able to apply for government and other types of grants. Explore the Charities Service’s Community Resource Kit for more information on raising and applying for funds.

Structure Your Expenditures

You’ll need a budget to determine what you can afford to spend, and to ensure your outgoings don’t exceed income. This is where accounting software or the guidance from an accountant can help you to create a solid and realistic budget.


Step 3: Put On Your Entrepreneur Hat

Not for profit’ doesn’t mean ‘for loss’, and just like a regular business, if you run an efficient operation, you’ll be able to provide a much better service to the people or cause you’re trying to serve. Here are a few tips: 

  • Hire the right staff. Your team can make the difference between failing and thriving in business, so make sure you hire well. Check out our blog Rockstars vs. Superstars: Get the Right Bums in the Right Seats for insight on building a great team.
  • Spend less than you earn. Although a profit isn’t technically what you’re striving for, if you make a surplus, you can reinvest that into the organisation or allocate to a new project.
  • Network. Making connections and setting up partnerships with the right people can help the organisation to raise more money, increase exposure, or improve your operations.
  • Know your ‘customers’. Just like with a for-profit business, you need to understand the members of your club or the people you’re providing charitable services to, so that you can tailor your organisation to meet their needs.
  • Get professional support. As with any other business, a non-profit is most successful  when you have an accountant to keep you on track and compliant with tax obligations. Partner with one that has experience with and a passion for helping non-profit organisations, like BW Miller Dean. 

We understand the unique challenges non-profit organisations face and can help you to put a business plan in place that supports your vision. We’re also good at being a sounding board for your ideas and give you unbiased advice. Contact us to see how we can help you make your vision a reality.