Watching Costs Is Always a Smart Investment
Both for-profit businesses and nonprofit organizations are looking for ways to conserve costs in the aftermath of the COVID-19 pandemic and resulting nationwide economic crisis. Many nonprofits looking for a path forward have had to strategically cut costs to contain expenses. Here are some suggestions to help guide cost cutting for your organization.
Focus on Staff
When COVID-19 was first making its presence felt in 2020, many nonprofits resisted laying off employees. Retention tax credits provided under the CARES Act gave some the breathing room they needed to retain employees.
Even with an economic recovery looking closer than before, organizations that were intent on preserving their staffs may now have no choice but to cut compensation costs. But alternatives to employee terminations may be available. Consider reducing hours or suspending employee benefits. You might trim wages or management-level salaries. And, allowing employees to work remotely may lead to lower overhead.
Consider Your Facilities
Facility costs often rank with staffing near the top of nonprofits’ operational expenses. With stay-at-home orders, you may have had your first experience with remote work in 2020. If operations didn’t suffer, you could reap significant savings by continuing in that mode and giving up, or at least shrinking, your office space, if possible.
If you have a lease, approach your landlord about renegotiating, especially if you’re nearing the end of the term. The market for commercial real estate faltered in 2020 and early 2021 in the wake of the pandemic and recession, so landlords were generally more amenable than they normally would be to rent reductions, abatements or holidays. As the commercial real estate market continues to rebound, landlords may still be likely to continue to work with you.
If your organization has more than one site, you may consider consolidating in a single location and closing the others. You may not be able to escape the rent obligations for the shuttered space, but you could eliminate the associated overhead, including insurance. If your nonprofit owns its facilities, look into selling, downsizing or renting out unused space.
Renegotiate With Vendors
Also explore renegotiation with vendors. If you shifted to greater remote work, for example, you’ll have less need for property maintenance and food services. Check for penalty or fee provisions in your contracts before terminating agreements, though.
It also could pay to join forces with other organizations, nonprofit or not, to increase your buying power. Or you could consolidate more purchases of goods and services with fewer vendors to obtain discounts. Don’t hesitate to be assertive in the pursuit of lower prices. It can’t hurt to ask your vendors to offer nonprofit discounts or contribute their services. Do your board members have any connections they can leverage to get you better rates?
Opt For Virtual Events
Many nonprofits have seen significant decreases in expenses for travel, meetings and events as gatherings were forced into virtual spaces. But, as with remote work, you may have been surprised at how well virtual meetings and fundraisers have worked. In fact, some report their virtual events have been more lucrative than past in-person events.
For example, one organization canceled its annual luncheon and instead simply requested donations from the usual attendees. It ended up with a substantially larger haul than a typical event would have. Other nonprofits have been able to attract higher numbers to virtual runs or walks, where participants do the activity on their own yet with far lower overall costs.
Time For Cuts
The COVID-19 pandemic, compounded with the escalating economic consequences and now the global instability, have cut across a wide swath of nonprofits. Making cuts to survive may be an option. Consult with your CPA or contact us to review your specific situation.