Being financially successful is the dream of just about every nonprofit. An operational surplus allows you to do even more with less stress and equips your organization to undertake new activities to accomplish your mission.
But you need to understand what is generating your surplus. If your organization engages in activities outside of its mission, you may be generating unrelated business income. Excessive unrelated business income may create UBIT (unrelated business income tax) or endanger the tax-exempt status of your organization.
A second important issue related to revenue is what you do with it. All surplus has to be invested back in the organization; it cannot go in the pockets of staff or board members. This rule applies whether your nonprofit has revenues of $4,000 or $40,000,000.
If your organization creates unexpected surplus, which cannot be used in operating expenses, you may wish to create an endowment, increase your rainy day reserves, or provide services at a lower cost to customers.