ARTICLE
9 August 2010

Cost Cutting Measures for Non Profit Organizations

LL
LarsonAllen LLP

Contributor

LarsonAllen LLP
As the recession abates, most institutions are still struggling to generate adequate revenues.
United States Corporate/Commercial Law

As the recession abates, most institutions are still struggling to generate adequate revenues. While trimming costs seems to have become a way of life, you may still need to reduce your budget. We've seen a wide range of nonprofits employ creative measures to manage budgets without cutting staff. As a firm, we ourselves have used some of these techniques.

Opportunities to cut expenses

During the past year we have found some obvious opportunities that were left untouched in our clients' budget processes. The cost cutting measures range from adjusting insurance coverage to changing the process through which you purchase supplies. Every facet of your organization should be examined. Below are several examples, but there are many more.

If your institution allows credit card payments, you may be missing out on possible savings. Request bids for credit card services to see if you can reduce the administrative costs for each transaction.

If your institution spends money on air travel, consider using a company travel agent to negotiate cheaper rates as well as accumulate frequent flier miles for the organization. If structured correctly, the employee and the company can earn miles for future flights.

Company cell phones, pagers, and Internet services for employees may be necessary for your business, but have you set clear standards regarding who is entitled to these benefits? Are you sure you are not paying for more than you need? This is the right time to carefully assess the communication needs of your organization as well as renegotiate for those services. Combining your services under a single plan may be easier administratively (one bill, one due date), and it may also bring you a lower price tag. Setting clear standards for determining which employees should have a company paid pager, cell phone, or Internet service might garner savings as well.

Go paperless

Consider communicating electronically, both internally and externally. For example, how many times do you see full sets of reports, documentation, or information printed for a meeting that would be unnecessary if appropriate technology were used (a PowerPoint presentation or Web-based slide show)? Similarly, sending your magazines and newsletters by email will save money on paper, printing, and distribution. Because emails are easy to forward, you may wind up reaching more people while helping the environment, too. In promoting a paperless environment in our firm, we have cut our print costs considerably.

Payroll provides another opportunity to reduce expenses. Many organizations still send employees paper checks or remittance advices to show they have been paid. Expense checks can be automatically deposited with a follow up email noting payment has been made. Current technology allows you to cut all of the wasted costs related to the process of cutting a check or printing a remittance. In the end, you are also becoming more efficient environmentally.

Assess your benefits package and administration

The employee match for pensions has long been a staple of benefits packages. Employees don't want to lose this benefit. Meet them half way by considering a temporary hiatus for the match or a reduction of the match. Most of our clients feel it is easier to reduce pension savings than cut pay (or jobs).

Today, a lot of institutions are self-insured for medical costs. If you are one of them, consider a billings review for accuracy. It is not uncommon to find claims administration inconsistencies that result in overpayment of as much as 10 percent overall.

Surprisingly, you may also have individuals that are included as dependents on your health insurance plans that should not be covered or could be covered somewhere else. We have found individuals included as dependents who are not even eligible. Even when a person was once an eligible dependent, several types of situations can change an employee's status. A benefit audit or a review of your benefit processes can help assure that your organization only pays for eligible dependents.

In cases where a family is covered by insurance at two workplaces, you may want to offer a monetary enticement to use only one benefit plan—the one at the other institution.

Payroll reductions

Even after employing a number of austerity measures, these are tough times and you may not be able to avoid brushing up against lay offs. Before you make cuts, discuss other options, such as unpaid sabbaticals of a week, two weeks, or even a day a month instead of the alternative. Employees would rather have a job with some reduced pay or gained vacation than no job at all.

Working hard to find the right cuts isn't just about saving money—it's about keeping valuable employees on your payroll. There are many other creative ideas out there. Sharing them may help other organizations take just the right steps to keep moving forward as the entire nonprofit community continues to recover its strength.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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