4 Ways to Monitor Nonprofit Overhead and Help Your Organization Prosper
According to a joint report from the Muttart Foundation and Imagine Canada, 73% of survey respondents said charities spend too much money on salaries and overhead. Considering the direct connection between donor attitudes and the resources afforded to nonprofits, it's a sobering statistic.
For donors, it's all about striking a balance. While some people are receptive to healthy investments in staff and locally sourced products and services, most donors still want the organization they support to keep a tight grip on nonprofit overhead.
Perceptions are important, but they aren’t the only reason nonprofits should regularly monitor their spending. A nonprofit’s budget should always account for time-sensitive opportunities. Because some projects (e.g. education and research) can be lengthy, nonprofit leaders must ensure there are available means to fund their initiatives.
This doesn’t mean nonprofits should start underpaying their staff members to meet budgetary goals and satisfy donors. It just means they need to take a disciplined approach to keep their spending in check.
Where Things Can Unravel
Like any business, there's no shortage of ways in which a nonprofit can overextend itself both in time and money. Some nonprofits invest in video or digital promotional materials that require software or staff members to create; others develop administrative software or applications with hidden costs that exceed what was budgeted.
Hosting events can also eat away at a nonprofit's budget. While these get-togethers often get a bad rap because they require extensive time and resources, allocating that funding elsewhere comes with noticeable drawbacks: fewer donations, fewer opportunities to recruit volunteers and fewer opportunities to relay your story and mission to a receptive audience.
Logistical spends also quickly add up. Unexpected expenses for maintenance, supplies, training and upgrades can snowball. Plus, nonprofits that lack adequate donor bases spend more time doing manual data entry and management than serving customers and cultivating new donors. Factor in these various sunken costs, and it's easy to see where spending can spiral out of control.
Rein It Back In
Even with all the unexpected expenses and other variables, it's quite possible to reduce and maintain control of your overhead. Here are four strategies that can make that goal a reality.
1. Swap Notes
If you're struggling with your budget, consult other nonprofits that have experienced similar overhead issues. Seek out similarly sized charities that could offer information or tips in areas such as staffing decisions, event frequency, marketing strategies, etc.
2. Partner Up
Work with a partner whose goals align with yours to collaborate on some of the more expensive or demanding projects you want to pursue. This is especially helpful when staging events. Find someone whose strengths complement your weaknesses (and visa versa) to enjoy the full benefits of a partnership.
3. Invest Locally
There is a multiplier effect that states for every $100 spent at a locally owned business, $45 goes back into the community. Work with local vendors, and promote how invested you are in nearby businesses. That will inspire other local nonprofits to do the same, enriching the community in the process.
4. Crawl Before You Walk
Start incrementally before expanding where help is needed. Don’t get drawn into too many projects at the start. Focus on your cause, develop a mission statement, and commit to it. As you grow, feel free to lend your services to more diverse projects.
When nonprofits ignore overhead, they neglect their short- and long-term objectives. Take deliberate actions to manage your spending and keep your nonprofit on track, and you'll be able to accomplish the goals that matter most.
Kevin Xu is the CEO of MEBO International, a California- and Beijing-based intellectual property management company specializing in applied health systems. He also leads Skingenix, which specializes in skin organ regeneration and the research and development of botanical drug products. Kevin is co-founder of the Human Heritage Project.