Your staff has taken a wage cut and two people have been let go. More clients than ever need your services. Even though your funding is off 8%, the organization is managing to squeak by this year.
However, next years funding is going to decrease even more and the demand for your services will certainly not let up. You just dont know how to be financially sustainable in 2010.
Its time to give your organization an efficiency audit ” an in-depth self-examination covering everything from labor costs to liquidity to back-end operations. This climate demands that nonprofits operate more efficientlysignificantlyand develop creative and innovative ways of looking at their programming, infrastructure, costs, and revenue.
The first step of your audit is to form a team of your best and brightest to develop contingency plans based on an anticipated revenue decrease. This group should propose what-if” scenarios and plan alternative courses of action, all directed toward creating a balanced budget for each scenario.
Balancing a variety of contingency budgets requires a thorough efficiency audit. What areas are reviewed during the audit process? Everything. Finding the solutions means starting with a list of the right questions in these critical areas:
Programs and their sustainability. Are they all within your mission, really? Do you know the financial support required for each of them, their costs, and their impact on the communities they serve? Do you measure how well each of your programs is performing and monitor the quality and productivity of your staff? Think about partnering with other organizations to improve the cost-effectiveness of services that you provide to the community.
Work environment and infrastructure sustainability. Is your office space used in the most efficient ways? Consider having your staff share space, reduce space, or work from home. How can you reduce your energy footprint? Can you share back-office services or outsource?
Your financial opportunities. How can you reduce your labor costs while preserving openness and minimizing stress with your staff? Do you monitor your budget and cash flow on a weekly basis? How liquid is your organization? What about marketing costs ” should they be eliminated or increased at this time? There are certainly other office expenses that can be reduced to be more cost-effective. Can you extend your payables and renegotiate any contracts, including the rent? Is there a more efficient alternative to your IT department?
Revenue opportunities. Is now the time to spend your reserves? Can donor or grant receivables that can be collected sooner? Look at your fees to see if they can be restructured to increase income without seriously impacting your clients. Are there assets that can be sold? Do you have a fundraising strategy for these times? Investigate getting a line of credit now when you dont need it.
Collaborating and the M word. Are there any efficiencies that can be achieved by sharing programs or staff with another organization? Do you need to think about merging with another organization, and how does the process get started?
The role of the board and other volunteers. How could your board members be used most effectively at this time? Look at their individual strengths in finance, marketing, human resources, or training, and put them to work. To free up your board to do more policy-making and oversight, talk to resources such as Boston Cares about the best ways to use volunteers to help plan and run special events
Positioning for recovery. Can you think of this time as an opportunity to strengthen your organization, so you can be operating more efficiently and effectively when times improve? Which of your stakeholders do you count on now to see you through this period, and how do you communicate with them? Will your organization be stronger or weaker when you come out of this?
So, the easy” solutions for 2009 have been put in place and youre still in reasonably good shape. But the potential cuts for 2010 and 2011 will require better planning and an even broader look at your operations ” starting with an efficiency audit.
As we all know, the issues and considerations reviewed in the audit are ones that should be examined on a regular basis. However, as Cathryn Mattson, chief administrative officer of Bridgespan Group, recently said, Sometimes crisis forces us to take action that we should have taken a long time ago, and the organization emerges healthier and more sustainable as a result.” Lets start now to take those actions.
Dick Rossman is president of RMR Consulting, an organization that helps nonprofits operate more efficiently. He can be reached at 508-525-0395 or RMR-Consulting@comcast.net.
SUBSCRIBE FREE – Keep current with the Wednesday Report emailed to you free each week. Click here.