Nonprofits are made to solve societal problems that typically can’t be solved for a profit. These organizations rely on donors who trust the nonprofit’s ability to act on their behalf and make the most of the money given to them.
One in five Americans believe that charities ought to spend about 23% of their budget on overhead, which includes administration, employees, offices, materials, nonprofit software, and equipment. While some nonprofits do their best to minimize overhead costs, others may not know where to start.
Here are ten ways you can save on nonprofit overhead costs.
1. Consider Cloud Computing When Starting Out
I have written before on how cloud computing is revolutionizing the membership management software industry. When it comes to saving money on overhead costs, implementing cloud computing is a great way to lower costs in the short run, according to Gartner.
There are plenty of cloud-based nonprofit software options to choose from.
Then again, if you are looking to cut costs as much as possible, you can’t get any cheaper than free. Qualifying nonprofits have access to options such as Google for Nonprofits, a free program with many donor relations tools available to users.
There is a catch for this strategy though. Cloud computing works best for smaller and less-established nonprofits that can’t afford the upfront costs of on-site data hosting and hiring an IT team. As a nonprofit grows, the transition to onsite data management becomes a preferable financial option.
2. Attract More Volunteers
Nonprofits will always have a need for paid staff as well as leaders in the field, but the proper organization and utilization of volunteers will work wonders for your overhead budget.
Attracting volunteers has a two approaches:
- Attraction through marketing methods such as formal announcements, social media, email campaigns, providing incentives, etc.
- Treating your current volunteers with attention and care, which will lead to more volunteers joining up through word-of-mouth.
Similar to fighting donor attrition, your battle to earn new volunteers while maintaining your current list of helpers will be determined by the incentives you provide, what you ask of your volunteers, and your respect for the time the give you.
The way you treat your volunteers will not only determine the number of volunteers that you attract, but will also play an important role in attracting quality volunteer help.
3. Office Sharing With Nonprofit Partners
My very first internship in the D.C. Metro area was with Young Americans for Liberty (YAL), a student activism nonprofit. I had earned the internship through my work as a YAL chapter president on my campus. Before I had ever seen their office, my imagination got the best of me. I imagined the office to be a large operation full of offices.
I came to find that their office was actually a small part of a building owned by a close partner organization with similar goals. At first I was slightly disappointed with what I saw, but after a short time, I saw just how smart this move had been. Rather than spend money on unnecessarily lavish offices, YAL was directing its money towards the programs and promises that it brags about to its donors.
This partnership was beneficial for YAL in order to cut superfluous costs and make the largest impact as possible. If it is possible for your nonprofit to work in close proximity with fellow organizations without disrupting productivity, office and building sharing is an effective method to cut down on overhead costs.
4. Combine Nonprofit Functions With Nonprofit Partners
Similar to office sharing, nonprofits with similar functions have a lot to gain by partnering and combining efforts, especially regarding costs.
I learned very quickly that YAL had solid partnerships with other similar nonprofits once I started receiving necessary materials from those other organizations while I was a chapter president.
Many activism pushes were backed by different organizations in terms of activity funding, materials, and other forms of informational support. Once I had begun working at YAL, I learned how these practices are perfect for cutting costs in ordering, printing, and shipping materials.
5. Try To Avoid Single Sourcing
Whether you are buying nonprofit software, purchasing materials, or ordering office technology, it is best for nonprofits to avoid single sourcing. Single sourcing is the practice of choosing a single vendor as a source for one or more materials or products.
While single sourcing has the benefit of lessening the time consumption spent on shopping around, the risks of single sourcing are potentially costly to your nonprofit. Single sourcing eliminates competition, therefore reduces the incentives for product vendors to offer higher quality products at a cheaper price.
By avoiding single sourcing, you open up your options for shopping around with other vendors in order to find the best deals. Your nonprofit overhead budget will thank you for it.
6. Consider Stockless Purchasing
There are plenty of nonprofits which don’t have the resources to purchase large office spaces and storage spaces in order to make room for all of the materials needed to fulfill their operations. In order to compensate for this many vendors offer stockless purchasing, which is an arrangement in which vendors agree to hold onto purchased materials until they are needed by the buyer.
Rather than spend money on extra storage or office space, nonprofits have the option to save money on overhead by organizing stockless purchasing with their vendors.
7. Assess Your Vendors Regularly
Another benefit of avoiding single sourcing is the ability to assess your vendors on a regular basis and compare their prices and services with other options in the market.
Humans are creatures of habit, which makes us prone to sticking to things that may not be relatively beneficial simply because “that is the way things have always been done.” When it comes to vendors, this is a temptation that ought to be avoided at all costs.
Annual, semi-annual, or (if you have the resources) quarterly assessments of your vendors are necessary to stay on top of overhead costs and efficiency. Don’t wait till a problem is staring you in the face to determine whether or not a vendor relationship is worth continuing.
8. Outsource Printing
Hopefully your nonprofit has never had the problem of an employee making 12,000 copies of their butt on your printer/copier combination or the office novelist printing out the entire manuscript for their upcoming steamy romance bestseller. Even if this has never happened before, we all know that printing costs money.
A great way to cut back on excess printing costs is to outsource your printing management. When you outsource your printing you are putting a third party in charge of printing all major materials for your nonprofit. This means no more ink cartridge replacements, printer repairs/replacements, or misprints which add up over time.
You will rest easy knowing you will never have to glance at chapter twelve of that cheesy romance novel piling up in the printer tray.
9. Bring Your Own Device
Office phone systems are no small expense. The average cost of an office phone system with voicemail and unified messaging ranges anywhere between $1,500 and $11,000. Who would’ve ever guessed that landline systems would cost so much today?
If you are operating a smaller nonprofit, the necessity for designated office phone systems is debatable, especially when 91% of adults have their own personal cell phones as of 2013. The cost of covering personal cell phone plans up to a point may be a cheaper option as long as work specific phones aren’t necessary.
If work-based plans are a necessary expense, there are other mobile plans available, such as Grasshopper, which cost far less than the traditional office phone system.
10. Check For Discount Nonprofit Mailing Rates
As long as your nonprofit meets specific criteria (listed below), the USPS offers Nonprofit Standard Mail as a cheaper option to ship materials and other goods, saving your nonprofit significant cash.
It is worth noting that this offer is only available for domestic shipping and not international, so as long as the bulk of your shipping resides within the borders of the United States, this program will benefit your budget.
Here is the list of eligible organization types:
- Voter Registration Officials
- National and State Political Parties
As long as you fall under one of these descriptions, you can enjoy cheaper mailing rates.
It is important to note that while cutting overhead costs are a benefit to nonprofit operations to a point, over obsessing on overhead costs is a harmful practice. There are studies which show a deficiency in nonprofit effectiveness due to the “Nonprofit Starvation Cycle.”
There isn’t a magic ratio for a nonprofit budget that ought to be spent on overhead and programs. Instead, your nonprofit ought to find what amounts work best while doing the best to avoid superfluous spending.
Have you implemented any of these suggestions? What worked for you and what didn’t? Let us know in the comments below!