Finance & Integrations

Revenue Categorization

By: Alec Hollingsworth

Updated:

July 16, 2025

Definition:

Revenue categorization is the grouping of income by type or source to enhance transparency and compliance in nonprofit financial management.

Revenue categorization is the process of systematically grouping an organization’s income streams based on their source, purpose, or restrictions. For nonprofit organizations, this means distinguishing between types of revenue such as grants, donations, membership fees, program income, and fundraising event proceeds. Accurate categorization is essential for financial transparency, regulatory compliance, and informed decision-making. It helps nonprofits track where funds are coming from and whether they carry any donor-imposed restrictions, ensuring that resources are allocated appropriately. This process also facilitates the preparation of financial statements and grant reports, which often require detailed revenue breakdowns.

Key Takeaways

Enables clear tracking of all income sources
Supports compliance with donor and regulatory requirements
Improves accuracy in reporting and grant applications
Facilitates better financial decision-making

Why It Matters

Proper categorization ensures compliance, transparency, and informed financial planning.

Real World Example

A nonprofit animal shelter receives funding from several sources: a government grant for spay/neuter programs, individual donations, and ticket sales from an annual fundraising gala. By categorizing these revenues in their accounting system, the shelter can easily demonstrate to stakeholders how much funding is restricted for specific programs versus available for general use. When preparing a report for the grantor, they quickly generate accurate figures for grant income and expenditures, ensuring compliance and building trust with funders.

Frequently Asked Questions

Why is revenue categorization important for nonprofits?

It improves transparency, ensures compliance with donor restrictions, and supports accurate financial reporting.

How does Keela help with revenue categorization?

Keela lets you assign categories to each revenue entry, simplifying reporting and ensuring funds are tracked correctly.

What are common revenue categories for nonprofits?

Typical categories include grants, donations, membership fees, program income, and fundraising event proceeds.

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