Why Finance Literacy Is Becoming a Competitive Advantage for Fundraising Leaders

by Kyle Evans, CPA and Morgan Harker

Fundraisers rarely enter the profession expecting to interpret budgets, explain financial statements, or respond to audit requests. Yet today, these responsibilities are becoming increasingly common, increasing the need for understanding and expertise in this area. This shift reflects a broader trend across the nonprofit sector: Financial literacy is no longer a back-office function. It is a frontline advantage for fundraising success.

When fundraisers understand why finance teams request specific information, everything moves faster - Miscommunication drops, rework decreases, confidence improves across teams, and efficiency is overall increased.

The most common issues include poor tracking as a result from misunderstanding. The good news is that the solution doesn’t require a complete rework of your system. A few quick and easy changes to implement include creating/implementing a budget, utilizing a consistent tracking system that includes separation/classification of revenues and expenses, and filing information in a concise and complete manner.

Budgets As A Tool for Better Decisions

Budgets are imperative to all organizations in order to give a baseline for where financials should be at a given point in time. Not only do they satisfy reporting requirements, they are strategic tools that help leadership, management, employees, and donors to understand where the funds of the organization are distributed. They are fluid and should be evaluated continuously in comparison to where the current actual numbers are at. If necessary, budgets should be adjusted throughout the year in relation to any new information that is obtained.

When starting from scratch, a great way to create an initial budget is through historical numbers. Looking at this through a fundraising lens, amounts received and disbursed for fundraising profits and costs should be evaluated in order to best determine future numbers, while also taking into account any changes that may affect the future such as economic conditions, key donor changes, new events, staff turnover, or one-time campaigns.

A key factor here involves evaluation the profitability of a fundraiser through budgeting. By reviewing gross revenues received and direct costs, organizations can determine their net proceeds from an individual event. For example, an event that raises $75,000 but costs $42,000 to execute produces net proceeds of $33,000. That figure provides a clearer measure of success and helps inform future planning decisions. It is also important to recognize not only the dollar cost of an event or fundraiser, but the amount of time and effort put into it as well. A fundraiser that receives the same amount of net proceeds but requires less time and effort, would be more beneficial.

Reduce Audit Stress with Better Documentation

One of the most common ways to create efficiency in an organization is to ensure the use of a consistent and clean tracking system. This could be through a platform as simple as excel. But to track appropriately, revenues and expenses must be categorized correctly.

• Contributions vs Sponsorships: Contributions are driven primarily by mission support, and donors receive little or no direct benefit in return. On the other hand, sponsorships provide measurable value to the payer. Examples may include advertising, recognition, or event visibility.
• Restricted Funds vs Unrestricted Funds: Identifying any funds that are restricted for certain purposes is crucial. Compared to unrestricted funds or donations that the entity may use at their discretion, restricted funds must retain documentation to ensure that they were spent appropriately.

Separate revenue steams help organizations maintain accurate financial statements, simplify IRS Form 990 reporting, reduce audit adjustments, and improve internal reporting and decision making. Regardless of the type of fund received, whether it be a grant, sponsorship, or contribution, the following information should be maintained:

• Award letter or signed agreement
• Approved budget
• Reporting deadlines
• Restriction language and eligible cost rules
• Final submitted reports

Fundraisers do not need to determine the final accounting treatment. However, identifying the nature of a payment early and clearly labeling revenue streams creates a smoother handoff to finance.

Build a Finance File That Works for You

One of the most effective changes a fundraiser can make is creating a centralized finance file. To ensure smooth staff transitions, complete grant applications faster, respond quicker to audit, donor, board, and management requests, and reduce last minute scrambling, create a structure where all documentation is easily labeled and accessible.

Whether your files are online, in a filling cabinet, or both – keeping corresponding documents together will help save time in the long run. A sample file should include:

• Current W-9
• IRS determination letter
• Latest financial statements or Form 990
• Grant agreements and reporting deadlines
• Event and campaign budgets
• Final reports submitted to funders

The Bottom Line: Better Collaboration Delivers Better Results

Fundraisers do not need technical accounting expertise to succeed, they need clarity. When development and finance teams work together efficiently, communication improves, reporting becomes more efficient, leadership gains clearer insight, and organizations reduce risk.

Understanding the purpose behind financial requests helps fundraisers work more effectively, strengthens collaboration across departments, and ultimately supports the organization's mission.

About the Authors

Kyle Evans, CPA is a Director at Boyer & Ritter who advises nonprofit organizations on financial reporting, audits, and compliance. He focuses on improving clarity and strengthening internal processes. (kevans@cpabr.com)

Morgan Harker is a Senior Associate at Boyer & Ritter who supports nonprofits with audit preparation, documentation practices, and financial tracking. She helps translate technical requirements into practical solutions. (mharker@cpabr.com)