From the archive · NPO sustainability
Surviving through smarter cost management
For many non-profit organisations, sustainability discussions begin with fundraising. But protecting the money already available can be just as important as finding new sources of income.
Written looking ahead into 2023 · KuTh Consultants archive · Originally titled “Surviving 2023 – 2024”
The outlook it describes is the post-COVID funding environment of the early 2020s, and the 34% figure belongs to the review it reports. Neither is a statement about conditions or results in 2026.
This is an archive article
It was written looking ahead into 2023, under the title “Surviving 2023 – 2024”, and is republished here as it was written.
Its description of the funding environment, and the saving it reports, belong to that period. Nothing on this page is a statement about conditions, rates or results in 2026.
The pressure
Raising money was getting harder, and was about to get harder still
Over the past decade non-profit organisations have found it increasingly difficult to raise funds, and this is going to become even more challenging in the aftermath of the COVID-19 lockdown. Failing economies, reduced profit margins, job losses, and existing funds being re-directed will shrink the availability of funds substantially.
If organisations are to survive, they will need to identify new and innovative sources of revenue. Because of this a major focus for many NPOs now is trying to find ways to make themselves more self-sustaining. The options of commercialising parts of their service delivery, offering training in their field of expertise, and producing and selling products are all possibilities, but what many are failing to do is look for ways to reduce operational costs. First thoughts go to staff retrenchments or salary cuts, but lowering monthly overheads is a more palatable and practical solution.
What the analysis found
The “special NPO rate” was not always what it appeared to be
Most organisations believe they are getting fair deals from suppliers, even “special NPO rates”, yet an analysis of selected cost areas of four large national organisations revealed that this was in fact not true. A team of technical experts reviewed supplier invoices and agreements across a range of services, including travel, communication, printing, banking, IT, insurance, procurement, and specialised projects and were able to negotiate an average of a 34% saving. This was achieved mostly by renegotiating rates with existing suppliers and/or resolving supplier disputes to reduce costs.
The biggest savings were made with communication costs (data and voice) followed by general procurement – groceries, general supplies. The end outcome was that the same supplier was retained after better rates were negotiated.
The case for an outside pair of eyes
Some conversations are easier when you are not the one who has to have them
NPOs can undertake to reduce their costs themselves, but there is merit in engaging independent consultants for this exercise. In many instances suppliers are referred by board members or friends of the organisation, are themselves donors, or have had a long association with the NPO so interrogating their costs can be an uncomfortable experience.
An independent team of consultants can avoid these influences and make impartial decisions purely on the facts that are established through the cost analysis exercise. They are also likely to have benchmarks for each mandate guiding cost margins as well as a database of suppliers that offer genuine better rates to NPOs.
Timing
The argument for doing it in a bad year rather than a good one
Many NPOs are still trapped in survival mode and believe that this is not the time to initiate a cost saving exercise. However, it is exactly the right time. Reducing overheads will surely help with the revised budgets that have had to be prepared, and as much as the non-profit sector is concerned about their future, the same can be said for the business sector. They need our business for their own survival and may well be willing to offer more favourable rates now to ensure they retain their clients.
There may be a lingering sense of loyalty, a resistance to exploiting a vulnerable situation, or the desire to avoid potential conflict, but making sure NPOs survive 2023 surely supersedes this. The business sector will be doing whatever it can to keep going, and we need to do the same.
About the author
Nomfanelo Dlali is the NPO consultant for KuTh Consulting, and wrote this article in that role.
The programmes referred to have changed since publication. Current NPO mandates are set out on the NPO page, and enquiries should go through the contact page rather than to the address printed on the original article.