Improve Management/Administration While Shrinking Budgets
* Before deciding to bring in a consultant, consider whether the skills needed are short-term or long-term. If long-term, you might be better off hiring a regular staff person. I knew an organization that was spending $150,000 per year on computer technical support consulting because they believed they could not afford to pay a regular employee to do the same work. In a situation like that, most organizations would be better off hiring an employee who would be more available, provide more hours of service (the hourly rate for an employee is likely to be considerably less than for a consultant), and provide better documentation and planning for organizational needs. It pays to keep track of these expenses to evaluate what the totals mean for the organization. The question of whether to hire an employee or a consultant also arises often around needs such as fundraising. Again, this is best resolved by determining the frequency of use. The more intensive the agency's fundraising needs, the more likely it will be better to have an employee.
* Pro bono legal assistance is a necessity for many nonprofits. The time to find a firm that will provide pro bono assistance to your nonprofit is before you have an incident. It takes time to secure pro bono help, and if there is a crisis looming, time may not be available. Look for a firm that would be willing to be pro bono corporate counsel for your nonprofit so that you will have someone to call when questions come up. Many agencies address this need by putting attorneys on the Board. Initial clarity about the role and help that can be provided by an attorney-Board member can prevent misunderstandings and dashed expectations. Hopefully, having legal counsel readily available and addressing situations proactively will prevent many situations, always the best strategy.
Keeping What You've Paid For - Knowledge Management
Knowledge management is the process that allows organizations to retain, catalog, build on, and make available expertise, insights and understandings to current and future workers. Ultimately, the long-term success of all cost-reduction and management-improvement systems comes down to the ability to keep the knowledge the agency has acquired. If no one remembers why it is better or more cost-effective to do things a certain way, then the effort that went into building that knowledge will be lost.
Knowledge management is not a strategy to adopt in a financial crisis, but is a best practices tool that helps prevent crises. Even with the best staff retention program, there will still be turnover, leading to loss of knowledge and experience. The impact of staff departures can be minimized by creating a comprehensive system for passing on accrued experience to new and growing employees. Even long-term workers need to look up how things are properly done on occasion, especially when the there are changes in policies and procedures.
To keep the agency's investment in learning and decision-making, you need to create a knowledge management system that:
• eases transitions between departing and incoming workers
• supports cross-training and growth for existing employees
• enables staff to easily find out who holds knowledge
• facilitates coverage when staff are ill or on vacation
• provides information regarding decisions, and the reasons for them so that staff are not continually going over the same ground
• preserves investments made in training
• makes equipment and documents available to all staff who need them and reduces time lost to hunting for things
• supports the organization in event of litigation by showing due diligence, good faith, and dependable records
If you have a tiny or new organization, knowledge management may not be big issue for your nonprofit. However, as volunteers or staff are added, knowledge management will be increasingly needed. The higher the rate of growth or turnover, the more important it becomes to have systems that will prevent chaos.
Organizational systems needed to implement a comprehensive knowledge management system include:
• Written policies and procedures – systems development
• Operations manuals
• A comprehensive orientation process and internal training programs
• Meeting documentation that makes decisions and actions clear, and a system to make the documents readily available
• Decision charts and logs
• An agency library
• An easy-to-use filing system
• An equipment catalog
• An agency calendar
• Subscriptions and membership planning
* Good, written operational systems provide the structure that keeps organizations working at peak efficiency. Most people hate ambiguity, not knowing where they stand or what they should be doing. Written protocols clarify expectations, create clear standards for training, provide guidance, and support high-level performance. Clear, well-developed systems save money by saving time, preventing costly mistakes, or worse, having to re-do or correct work. Well-implemented systems reduce the likelihood of litigation, a major cost-savings factor in itself. (I have joked for years that the first line in everybody's job description should be “Keep us out of court” because of the expense, stress, and productivity losses of litigation.)
* So many organizations throw away their investment in books, journals, and other resources simply by failing to keep track of them so they will be available when needed. A library that makes the accumulated resource materials (books, magazines, journals, brochures, videos, films, and tapes, training packets and similar materials) easily available to whomever may need them preserves your investment, prevents loss, and maximizes learning. The easiest way to let everyone know what is available is to put the catalog in a Universal or shared directory (described in Chapter 12) that all staff with computer access can get to. All materials should be centrally stored with a catalog system that mirrors the agency filing system.
Painlessly Trimming Financial Management Expenses
Audits are such a major expense for nonprofits that I have included three strategies from this chapter rather than the usual two. The chapter covers a lot more ground than just audits, but this cost is so significant that everything else pales by comparison.
* As the largest financial management expense, the required annual audit is a crucial area for cost control. The audit should go beyond complying with funder requirements to include using it to develop more effective, streamlined, accurate, and secure financial management systems. Use the audit process to evaluate whether existing management practices meet current standards, particularly in the area of internal controls (practices designed to prevent internal theft or fraud – see below). The more closely the organization follows the practices described in the internal control questionnaire provided by the auditor, the easier the audit process and the better the ultimate report will be. In addition, by structuring accounting systems following internal control requirements, the audit will go faster and cost less.
* To save money and stress, have all the documents the auditors will need to see during the audit set up for them before they arrive. At one organization where I managed the audit process, we created two boxes with hanging files during our preparations for the audit: one for documents proving every item on the internal control questionnaire (and in the same order as the questionnaire) that would go to the accountants, and another that we kept, that was an exact copy of the box we gave the auditors (this second box prevented problems and answered questions on many occasions). Our preparations helped ensure not only that we did everything required, but they saved time, problems, and expense. When negotiating the audit contract, asking about cost-reductions based on this kind of preparation may save you a lot of money.
* When selecting an audit firm, great care is needed. An auditor who is not familiar with the different world of nonprofits will be getting his on-the-job training at your expense – and your organization will go through much more hassle and aggravation than if you had one that understood not only the difference between nonprofits and for-profits, but has some real appreciation of the role and values of nonprofits. Even better, an auditor with specific experience working with nonprofit groups in your field will have more useful input for your organization, may be able to work more efficiently (it won't be necessary to explain everything about the field), and may be less expensive. Similar organizations to yours are likely to be the best source for the names of auditors who work well with nonprofits.
The Inevitables – Taxes and Insurance
* Nonprofits that own their buildings or equipment are usually eligible for a property tax exemption. The exemption will not be given automatically but the application process is fairly simple. Paperwork will have to be completed every year.
* Tax reports must be filed on time to avoid nasty fines, one of the worst uses of scant money. The fine will show up in an audit report and funders will not look favorably on the management conditions which caused the fine. Keep an agency calendar and post the due dates for all tax reports on it sufficiently far ahead to get the report done on time without struggle. Make sure that any staff who must contribute information for the preparation of the report are aware of the necessity far enough ahead to get it in on time. Give them earlier notice if they are juggling many crucial tasks.
Fundraising on a Shoestring
Although fundraising is in some ways the last place to make drastic budget reductions, cutting unnecessary costs is always beneficial. Funders look positively on organizations that demonstrate that they deliver effective services with minimal overhead. Tight financial times may indicate a need to increase fundraising spending rather than cut it, but it is also important to evaluate fundraising expenses to be sure that they are well chosen and effective.
* Review the agency mailing list completely at least annually to delete names of people who have not responded to any mailing. Include opt-out information in postal as well as e-mail newsletters so people can be taken off the list if they are no longer interested. Update the mail list after every mailing to remove the names of people whose mail has returned. Sending out mailings to people who are not there or interested is expensive and not beneficial.
* When planning special event budgets, beware of frills that may make event organizers happy but are unlikely to lead to increased revenues, publicity or good will. Always keep in mind that revenue, PR, and good will are the point, not the event itself. Nonprofits are not expected to do things fancy. Of all the (numerous!) annual dinners I have ever attended, the most beautiful and memorable was the simplest – the only decorations (and the only lights!) were floating candles and roses on mirrors on every table. Magnificent.
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