3.0 out of 5 from 121 votes
Generating income is more than fundraising. It is about making your organisation sustainable by establishing a range of funding (diversifying your sources of income), so that you are not dependent on one source.
Your income generation plan must ensure that:
Funds received from funders for a specific purpose are known as restricted funds: you are legally obliged to use them only for the purpose for which the funder gave them to you.
In contrast, unrestricted funds can be used for any purpose that helps you to achieve your charitable objects. The more unrestricted funds you have, the more freedom of action you have. You can, for example, choose to cover costs that funders are reluctant to fund, like core costs.
The discipline is the same whether generating restricted or unrestricted income and funders will require the same financial information of you.
These are some of the basics funders look for when assessing applications for funding:
A good plan for generating income will aim to achieve sustainability by stabilising your funding base, in some cases increasing your funding and diversifying your funding sources.
Sustainability ideally means managing your income streams in such a way that if or when one stream comes to an end, the work can be repositioned, making it suitable for funding by another stream. Opportunities available to diversify income streams range from donations and grants to service level agreements or contracts to deliver services, to trading in goods and services.
Remember fundraising activity has costs associated with it, for example fundraiser's time. It is important therefore that these are reflected in funding applications.
Diversification also has costs associated with it, such as increased management effort. You must therefore recognise at what point the benefits of diversification are outweighed by costs.
Source: Published with permission from Cass Centre for Charity Effectiveness. This material is taken from "Tools for Success: doing the right things and doing them right", published in October 2008. Download or buy your copy from Cass Centre for Charity Effectiveness.
New sign-ups qualify for a free training session from our StudyZone.
How-tos are written by our users to share practical knowledge.