4 Tips to Effectively Manage Your Organizational Expenses
Over the past five years, I have personally spoken with hundreds of nonprofit chief executive officers (CEOs), executive directors, and chief financial officers (CFOs). While driving donations is an ever-present topic of our conversations, I find that top nonprofit organizations are also focused on managing their organizational expenses.
Specifically, they are looking at reducing internal costs without impacting programming. Nonprofits tend to share a collective goal to drive spend on programming and services. However, in order to maximize those impactful dollars, it is key that they manage and reduce overhead, administrative, and other internal costs. Use these 4 tips below to help ensure that your organization maximizes your impact by being a diligent steward of your donors’ funds.
1. Track Everything You Are Spending
With even just a few employees, it is easy for the details of where your money goes to get lost in a sea of receipts, reimbursements, and credit card bills. While many businesses have adopted more modern expense management and payment tools, many nonprofits are doing things the old way. They use petty cash for purchases, payment expenses by corporate check, and have expenses from employees submitted on paper.
With modern expense management tools, it can be easier to know where money is being spent. Most modern tools include built-in analytics to drill down and find spending. Some tools even include receipt scanning, so you can find out exactly what was purchased instead of just the total amount spent at a merchant.
There are many expense programs on the market targeted at businesses that work equally well for nonprofits. Stand-alone tools such as Expensify, ExpensePoint, or Divvy bring a modern, mobile-friendly expense app to your employees, while still integrating with backend account software, like QuickBooks.
After selecting one of these tools, you can ask your employees to use them in order to get reimbursed. With a little bit of individual time upfront, you can thus monitor spend across the entire team and understand where organizational expenses can be reduced or simplified.
For example, you might find certain categories, like office expenses, are higher than expected. As you identify outliers, you can undertake targeted efforts to reduce those organizational expenses through various techniques, such as specific budgeting rules, new spending limits, or vendor negotiation.
2. Use a Group Purchasing Platform
Unless you are one of the nation’s largest nonprofits, you may find that you don’t have the power to negotiate better deal terms on common expenses like office supplies, travel, or even insurance. There are several existing national programs out there, such as Purchasing Point and Nonprofit Purchasing Group, that your organization can join to get discounts on hundreds of different vendors.
Users of the Charity Charge credit card, a “small business” Mastercard program specifically designed for nonprofits and issued by a St. Louis-based Commerce bank, get a Purchasing Point membership included with their card.
While you may have to make a few changes (e.g. a different rental car agency) to get the discounts this can make a big difference as discounts range from 5 to 40%. Even a simple move like joining Costco or Sam’s Club can make a difference. These warehouse clubs not only provide regular retail goods, but discounts on business services that a nonprofit can use.
3. Implement a Corporate Card Program
For some nonprofits, asking employees to pay for items and get reimbursed represents a burden to the employees. For others, their local bank requires that the president, executive director, or CEO signs a personal credit guarantee to get a credit card.
Depending on your nonprofit’s size, you may be able to get a corporate card with features like multiple cards for employees, spending limits, and no personal guarantee. Further, Charity Charge provides a nonprofit Mastercard program that requires just two years of IRS 990 tax forms for a pre-approval that will match your organization’s spending needs.
In addition to the card management side, many corporate card programs come with additional benefits, such as fraud protection and discount programs. For example, many travel and entertainment brands include discounts by simply using a Mastercard, no other codes or work required.
Features like fraud protection, foreign exchange access and others can reduce risk and organizational expenses in other ways. With zero-dollar fraud liability your nonprofit’s information will be protected from being stolen or used for unauthorized spending.
4. Earn Rewards on Your Corporate Spend
Spending less and watching pennies isn’t the only way to reduce your overall administrative expense burden. By implementing a payments tool, such as a rewards small business or corporate card for your nonprofit, you can get an expense reduction through the rewards program itself.
This is usually one of the easiest things to get everyone on the team to be excited about, as you don’t have to cut back on your spending in order to save. Rewards programs provide benefits as you spend, giving you a little bit back on everything you need to buy for your nonprofit to operate.
With many nonprofits spending in excess of $100,000 in general internal expenses, a 1% cash back card is a $1,000 in savings that go directly to your organization’s bottom line. The Charity Charge card offers a flat 1% cash rate on all purchases in the form of a statement credit.
As Kate Williams, Executive Director of 1% for The Planet says, “When we learned that we could shift our business expenses to a Charity Charge credit card, it was a no-brainer. We like that using the card integrates giving back into every purchase we make.”
Manage Your Spend Without a Headache
The positive benefits of effective donor management are something many nonprofits are already aware of. However, when you combine them with a sharp eye for managing organizational expenses as well, you can increase the scope of your impact. Whether you start with one of these tips or work to implement all four, you can see improvements in your budgeting through reduced administrative expenses with ease and without negatively impacting your programming.
Stephen Garten is the founder and CEO of Charity Charge. He’s been a featured speaker for United Way, South by Southwest, and Dreamforce. In 2015, IBM selected him as one of the top 5 social entrepreneurs in the world and featured him in their web-based reality show, A New Way to Startup. In 2008, Stephen earned an economics degree from Washington University in St. Louis. Following his graduation, he visited Austin in 2009 and loved the city so much that he returned for good several months later. Stephen worked for the Austin Technology Incubator at The University of Texas at Austin before starting Charity Charge.
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