e-Newsletter: Connect to Solutions
Cutting Costs Without Cutting Your Mission
by Jeff Vengrow, Director of CNE Solutions
Budgets are tight and getting tighter in these stormy times. Traditional sources of financial support are no longer reliable and the future is more ambiguous than ever. What's a nonprofit organization to do? Here are four suggestions to consider:
1. Know what’s most important. Revisit your mission.
This is a soul searching time to identify those programs and services that are closest to the core mission of your organization, and which are less so. The easiest way to conserve resources is to eliminate nonessential programs and services and the costs associated with them. It’s important to know all the costs associated with each program including direct, indirect, and allocated costs. Most organizations develop contingency budgets to weather the stormy economic times.
2. Create financial management tools and use them.
Develop a weekly cash flow report with projections calculated out at least 6-9 months. Know the timing and sources of incoming cash and outgoing obligations. Cash on hand is what allows an organization to continue regardless of what the balance sheet or monthly statements reflect.
Manage cash by using the Accounts Receivable Report (with Aging) in conjunction with the Accounts Payable Report (with Aging) as cash management tools. In addition to how much you owe and what is owed to you, look at the age of all these obligations as well. For example, you may seek extended terms from creditors, or accelerate payments owed to your organization, perhaps offering a discount incentive for fast payment.
3. Reduce “fixed costs”.
Review your contractual obligations and consider renegotiating fees and expenses such as office or office equipment leases. Reduce staff benefits such as the co-payment on insurance, reduce hours, or consider pay cuts.
Since the bulk of most nonprofit organizations budgets are personnel related, looking at the work itself and reviewing job descriptions may reveal opportunities to eliminate lower value tasks or change job descriptions in support of higher value activity. In the extreme, you may also need to consider position elimination.
4. Look at your programs and services as processes, not as pieces of your organization’s territory.
Consider collaboration with other nonprofit organizations to reduce administrative costs, to provide programs jointly, or to outsource some aspects of your services altogether. Map out your processes to identify opportunities to improve upon how the services may be provided at lower cost. After all, it’s not about you, it’s about your mission.
Healthy organizations avail themselves of these methods even when times are good. These are practices that will help you not only weather the storm, but to thrive when the storm has passed.
Contact Jeff Vengrow for more information about cutting costs or resource development at 330.315.0432 or email him at vengrow@cfnpe.org.
Resources / Sources
Angelica, Emil and Vincent Hyman. Coping with Cutbacks: The Nonprofit Guide to Success When Times Are Tight. Minnesota: Amherst H. Wilder Foundation, 1997.
Boschee, Jerr. Keep or Kill? Score Your Programs. Nonprofit World Sept.-Oct. 2003: 12-15. 30 June 2009. http://www.socialent.org/pdfs/NONPROFITWORLDOrganizedAbandonment.pdf