Tuesday, December 30, 2008

3 tips to reduce expenses

When times are tough, nonprofits often need to cut expenses to match their declined revenue. It is important to be strategic when cutting expenses, and to avoid a knee-jerk reaction to the financial climate. Here are a few tips for reducing expenses:

1. Take a close look at what you are paying right now for everything.

There are savings to be had in almost any area of spending. For example, you can change your payroll service or negotiate a lower monthly fee. I know several nonprofits that use PressGold Payroll, a small local firm and they only charge $22.50 as a base fee and $1.75 per employee. You can also bring your nonprofit's communications into the 21st century by switching your phone service to VoIP (voice over internet telephony) based services like Skype, and take advantage of this website for free conference calls. Speaking of conference calls, schedule more of them! We all have been in meetings where a meeting wasn't really necessary. In those cases suggest a conference call which can save in mileage and parking. Also, take a look at your printing and office supplies costs. Businesses like Office Max offer special discounted prices for nonprofits, and don't be afraid of negotiating with them for a better deal.

2. Take advantage of free help.

Make sure to take advantage of your volunteers, and continuously recruit new ones. Volunteers can do amazing things, and to illustrate that is Pet Haven, a nonprofit organization in Minnesota. Pet Haven is run solely by volunteers. Volunteers plan their annual event that raises $20,000+, volunteers manage their 100+ other volunteers, volunteers run their website, and more. This is a great example of how volunteers can make a huge difference in your organization- in fact they could even run it. Also, don't forget about interns. Students are always looking for opportunities to gain knowledge and skills (and a good recommendation), and will work for little or nothing. If you have had to cut staff hours or lay staff off, don't let their work do undone, give it to a volunteer or intern.

3. Outsource some of the work.

Many nonprofit organizations have to make the difficult decision to lay off staff due to lack of revenue. In those cases, a viable option is often hiring an independent contractor to do some of the work of that employee. For example, if your organization had to let go of your communications coordinator, you can often find an independent contractor that can manage your e-newsletter and design your collateral for less than half of the cost of that employee. Now, this is rarely the recommended route because having staff in these important roles will affect an organization's long-term success, but in times of financial crisis it can be a short-term solution. If your organization decides to do this, you need to be very careful. You need to make sure that the IRS wouldn't classify this person as an employee, which will only get your organization fined and responsible for back taxes.

Finally, make sure you stay on top of your budget. A budget should not be made, approved by the board, and then set aside never to be looked at again. You should review it monthly to make sure you are on track. It should be a road map for your organization’s spending.