Cost Saving Ideas


Five Ways Your Nonprofit Can Hedge A Funding Shortfall

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Published November 16th, 2018 by

Five Ways Your Nonprofit Can Hedge A Funding Shortfall

Non-profit organizations across the country are experiencing the problem of having to provide a greater range of services while receiving fewer financial resources.  According to the 2018 non-profit survey by Marks Paneth LLC, 38 percent of all non-profit respondents experienced funding cuts in 2017 with 63 percent seeing an increase their demand for services.  Moreover, non-profits may be faced with a reduction in individual and corporate donations, and the changes to federal tax regulations can impact the method whereby charitable donations are deducted.

Faced with future uncertainties and financial challenges, some non-profit organizations may look into using their endowments, cutting back on services offered, or liquidating different assets such as real estate.  Of course, these strategies should only be considered as a last resort by the company.  Instead, organizations should attempt to stretch their budgets by locating savings from the overhead costs.

#1:  Look Above And Beyond The GPO

Group Purchasing Organizations, also known as the GPO, are a means of leveraging volume discounts on services and goods via the collective purchasing power of the member organizations.Non-profit organizations utilizing GPOs may feel they are receiving the maximum amount of savings available to the business.

While a GPO may offer competitive pricing on the various goods available, these goods may not be the items member organizations need or desire to purchase.  In these situations, some of the "off list" products may come at a large premium.  It is often the case that organizations with deal directly with vendors to help understand the non-profit's specific requirements and allow them to gain a customized offer that will result in more beneficial discounts on the services and goods you actually utilize.

It should be remember that in addition to the member rates charged by the GPOs, the group purchasing organization is earning a fee on the transactions performed by approved vendors as an exchange for bringing the vendors more business; as well as manufacturing rebates for specific promoted goods.  The built-in rates are removed when a non-profit organization negotiates directly with vendors.

#2:  Conduct Thorough Reviews Of Existing Services And Related Prices

In most situations, we learn that due to time constraints and employee limitations, the review of continuous various service invoices may not identify any changes in paid rates. Approvers may conduct high-level reviews to assess the rates and then sign off.  For instance, items that could be missed include suppliers not giving notice of periodic price increases or placing the increase in emails or a contract's small print.

By not fully reviewing the auto-pay invoices, as is seen in many Payroll invoices, the invoice cross-check is not performed by accounting staff as accounts payable is not part of the invoice processing procedure.  During this stage, fee increases can be neglected with vendors announcing fee increases on actual invoices.

Some non-profit organizations have noticed that not cancelling redundant services can influence the pricing rates.  It has been seen that expense categories are replaced, but are not completely cancelled and will continue to be billed.  After performing a full review of these expense categories, non-profits can find the rates are charged for items alternate to what was originally contracted.

Various vendors provide contracts that include notes to search online for the "complete terms and conditions".  The terms and conditions generally state that vendors are permitted to increase pricing at least one time per annum to the value of five percent.  If, however, the increase is in excess of five percent, the customer has twenty days from the time they receive the invoice to dispute the fee increase.

In the telecommunications sector, there are various vendors that increase the rate of POTS lines with other similar services a minimum of once or twice per annum.  The majority, but not all, of these vendors will pass out a form of notification to inform the non-profit organization.  However, the notifications can be ignored and the increase happens without any awareness from the organization.

To prevent any of the situations mentioned above from happening, it is recommended that you consider performing a thorough line-by-line review of the organizations invoices.  The purpose of this task is to firstly ensure the prices being charged are consistent with all active contracts, and to confirm the service stakeholders are using the services for which they are receiving bills.

#3:  Ensure The Vendor Is Working With You To Streamline Expenditure

Non-profit organizations should consider working with vendors to develop a strategy to reduce their service costs.  For example, let us consider insurance.  An employee responsible for insurance at the non-profit organization can wear different hats.  While they are ensured that the insurance coverage is enforced, they do not have the skills to uncover means of premium reduction, service improvement, and coverage enhancement.  

Let us consider risk management as part of insurance coverage.  The question to be asked is whether strategies are being used to mitigate changes of accidents occurring?  By reducing the chance of a claim occurring, the non-profit organization becomes a "safer bet" making underwriters invest in the company.The competitive tension reduces premiums. The development of risk management strategies for different levels of coverage begins with the insurance broker.  The broker understands the best practices according to other clients.Using this information, non-profits should insist that brokers offer risk management consulting as part of the insurance service package.

#4:  Reviewing The Supplier Pricing Without Challenging Existing Relationships

The majority of non-profit organizations have strong exiting relationships with suppliers that extend beyond services provided, as well as suppliers providing support by sponsoring fundraising events and annual galas.  This is a vital aspect of the supplier-organization relationship where many non-profit clients are wary of asking renegotiation of the prices, fearful that it may affect future donations.  However, the support from existing suppliers should not impact on paying competitive fees.

A supplier who offers donations can offset a portion of the cost within the services offered.Keeping this in mind, it is essential that you review the organization's purchasing history and ensure the cost of services is within a suitable range.  Non-profit organizations can seek out third parties to review and negotiate certain fees as this will incite competitive pricing while still maintaining existing relationships with current suppliers.

#5:  Use A Third-Party For Purchasing Guidance

A further reason to consider using a third-party to assist with the procurement of goods is that existing procurement staff may not have sufficient bandwidth to perform a thorough review of the non-profit's purchasing history.  Third-party resources can take time to review the purchasing history and negotiate with suppliers on your behalf.  This will ensure you receive the best price for the provided services.

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