Although a nonprofit organization reinvests any incoming profit into its services, research or local programs, it does require funding to operate on a daily basis. A nonprofit organization is similar to a for-profit organization in terms of operations, as it has common expenses, paid employees and general operating costs. These costs may vary depending on the nonprofit organization in question.
A nonprofit organization hires employees to keep the organization operating smoothly. Common employees include a board of executive members, a CEO, office employees and representatives. Larger nonprofit organizations may also hire managers for the office. Each of these workers requires payment for their work. Larger nonprofits may offer benefit packages and health coverage, meaning that these factors also contribute to operation costs.
The term “fixed expenses” refers to those payments that are continuous each month. These figures do not necessarily change month-to-month. Rent, bills, utilities, Internet and telephone bills are all fixed expenses. These expenses are the most common operating costs, as a nonprofit organization may not be able to perform general services, programs or tasks without these readily available.
Flexible expenses change each month but play a role in the general operations of a nonprofit. Flexible expenses include rental car fees when attending conferences out of town, hiring temporary help for the office or programs and costs associated with hosting events and fundraisers. While one month may not have any flexible expenses, other months may exceed the fixed expenses to operate and promote the nonprofit organization.
Program, Research and Service Costs
While some nonprofits focus on conducting research with the goal of finding a treatment or cure for a specific disease, others focus on providing services or programs to help the local community. These programs may include donations of clothing or food from the public, while others require funding to pay teachers who offer advice to job seekers or business owners, for example. These programs cost money to operate and will vary depending on the size and scope.
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