One’s interpretation can either result in real change or avoidance.  Those nonprofits that choose to wait for the environment around them to change or govenment to tell them what to do, are going to end up in failure.   Those nonprofits that take the moving forward attitude will survive and grow.

Instead of fighting over what resources to allocate to any one core function consider outsourcing.  Time management can be well served with the right contracted services. 

With the intention of funders and donors to have 501 c 3 nonprofits be as effective and efficient as possible it is important to have the right infrastructure in place.  Those nonprofits that can clearly show that they meet the mission of their 501 c 3 status will match the economic climate where government is looking for more for less. 

To help level the playing field for non-profit 501 c 3 organizations outsourcing achieves the economies of scale larger organizations already realize without taking away the quality achieved in the existing small, specifically focused operation. 

A 501 c 3 nonprofit should have the core services:  payroll, accounts management, general accounting, bids, contracting, pricing, purchasing, and cost analysis.  These core services will provide the 501 c 3 organization with most of their day-to-day and strategic planning.  At the end of each year, the organization should develop the next year’s budget and will be able to plan labor and resources accordingly.  The core administrative services are to help plan the resources, providing estimates based on the organization’s historical data.  On a weekly basis, the 501 c 3 organization will be able to see how they are performing budget versus actual and month to date.  For the longer term, the core services should provide quarterly and annual planning and will provide longer-term analysis for resource and labor management.

While the core administrative services should provide the 501 c 3 management and Board the data necessary to manage the organization, the data must create certain reports pertaining to cash management, employment taxes and employee benefits.  The cash management should show what it takes to reach levels of 30 day, 45 day and 90 day cash flow.  The purpose of cash reserves is to enable the non-profit to have the ability to react to emergencies and growth without affecting day-to-day operations.

403B or 401K plans allow non-profit organizations to provide defined benefit pension plans to their employees, often with tax advantages to the employees and employer. 

The current economic outlook focus is to decrease the growth of government spending across the board, which means cutting funding to specific programs run by non-profits and the consolidation of others.  In order to maximize the money allocated to direct care/project results, government is forced to concede the benefits realized through a larger number of small, specialized non-profits and purchase services from larger organizations with an expectation of more efficiency.  In addition to this, larger organizations are able to weather a reduction in funding by diversifying the type of programs they offer and having larger credit lines, larger fund balances and assets that can be leveraged to offset deficiencies. 

The nonprofit industry covers many types of organization but it is the 501 c 3’s that are primarily financed through two main sources; government agencies and the private sector philanthropy.  Both sources are heavily tied to the health of the economy, with the private sector being more closely tied to the performance of investment securities.  With both the economy and the major aggregate indexes (equity and fixed income) having suffered declines in the past few years, nonprofit 501 c 3  funding has leveled off and the competition for funds among non-profits has become much more fierce.  Both government agencies and philanthropic organizations are becoming more selective in distributing funds, looking for nonprofit 501 c 3 organizations providing a more effective use of its funds.

Regardless of size, every non-profit organization needs the ability to do some basic administrative functions, such as human resources, accounting, purchasing, and auditing.  Larger non-profit organizations (defined by us as having greater than $3.5 million in revenue) are able to achieve economies of scale in many of these areas, allowing them to spend a smaller percentage of their overall income on administration and more on direct care.  Non-profits generally begin to gain this benefit by expanding to offer a wider cross section of services across multiple communities.  For small non-profit organizations 501 c 3’s, they are unable to benefit from such economies of scale.  Rather, they tend to excel in treating a small, focused segment of one community very intimately.  Simply put, they subscribe to the theory of quality over quantity.

In addition, most non-profits 501 c 3’s depend on government funds to support their operations and pay for their overhead.  Government organizations which provide the funding for these non-profits are constantly struggling with the need to purchase services in the most efficient, cost effective manner possible.  Often larger non-profits are able to offer the efficiency and cost effectiveness the government is looking for, but the government is looking for more than just efficiency in the human service sector.  They are also concerned about quality of care issues and free care/services.  Small non-profits are typically focused on a small, specific segment of the population, which naturally lends itself to a high quality of care and more donated services from volunteer time.

The management of a nonprofit does not have to be difficult for any size nonprofit especially small organizations.   Asking for help from consultants is not admitting the lack of skills or defeat.   Contracted employees are the best way to manage work, with the highest credentials for the work assigned.    Nonprofits need to focus on the “day job” their mission and let others perform administrative functions.  Consultants are especially able to make a difference for the smaller nonprofits under 3.5 million dollars and start-ups.  Consultants understand that navigating the often confusing and extremely regulated world of non-profit business can be a scary prospect for many people whose main focus is to help people and enhance communities.  The right consultant will understand that the non-profit business world can be just as competitive as the for-profit business world.  The right consultant can offer an expertise in dealing with a non-profit’s finances by taking care of the finances, year end reporting, payroll, and all other administrative aspects for the nonprofit, thereby lowering the nonprofits barriers to entry, while still leaving the organization in complete control of their strategic planning.  By using an expert in the understanding of non-profit finance, development and government regulations, the right consultant cannot only help the nonprofit avoid losses, but to thrive and grow by adhering to the same business sense applied in the for-profit arena.

Seeing the potential for efficiency in the non-profit sector, the right management company can generate economies of scale and decrease the total overhead cost for a non-profit corporation.  It should be its goal to provide nonprofit entities the opportunity to devote less to administrative costs and more to direct services.  As its philanthropic mission, the management consultant company should be a socially responsible company and committed towards making a difference for the nonprofit.

pic from Jacob Covey

The great majority of non-profit organizations are started with the lofty goal of a cause such as improving or enhancing the lives of a specifically targeted group in their community, with services ranging from child day care for low income mothers to group homes for mentally disabled individuals to saving the environment.  The leadership of the founding individuals of a nonprofit for a cause are the first donors to the nonprofit, volunteers and expected members of the philanthropic nature expected to be reached by the nonprofit.  These non-profits serve a much-needed function around the state or country by picking up where government programs or causes often fall short.  Many of these organizations are small, serving a very specific segment of communities, allowing them to the opportunity to truly get to know who their clients are, what the communities needs are and how best to serve them. 

Extraordinary people with an extra-ordinary desire to improve communities run these non-profits, and who often dedicate and donate much of their free time their whole lives towards helping the cause.  A number of these organizations have donors who wish to remain anonymous.

Let’s get to some facts on nonprofits as you consider your year end donating.

The number of nonprofit organizations reported by the National Center for Charitable Statistics as of October 2009 was 1,569,572 that reported to the IRS.  Since 2006 that is an increase of 91,378 nonprofits. This does not include the 175,000 religious congregations who choose not to report as allowed by law.

Largely overlooked by many in the business arena, the non-profit world is a critical sector of our economy.  The employment of hundred’s of thousands individuals provides for the economic wealth of many communities and the creation of many for-profit companies.  As a reader and possible donor I remind you that most colleges, universities, and hospitals are nonprofits.  From a pure economic view, the education and health care field of nonprofits provide for the greatest measurable opportunity to see an outcome which resulted from the donation.

In 2007, public charities reported over $1.4 trillion in total revenues, nearly $1.3 trillion in total expenses and nearly $2.6 trillion in total assets in 2007. (Source: The Urban Institute, National Center for Charitable Statistics, Core Files 2007)

Volunteering and charitable giving even with a huge influx of funding from the government, non-profits are still prone to struggle in down economic times, since the other part of their funding, donations, often take a turn for the worse.  In addition, while there are many companies created in the for-profit arena to provide help to organizations in becoming more efficient in this business climate, few focus on the non-profit world.   

Even for those who realize and understand the obstacles of starting a small business, few understand the competitive nature of the non-profit industry.  There is a strong movement among social service advocates and the people who utilize social services to have more choice in selecting from whom services are provided and what different types of services are offered.  This has spurred growth in the industry, not just in the number of new nonprofits established each year, but also the amount of money allocated by the government.  This new influx of money has only added to the pre-existing tension between large and small non-profits. The new, smaller non-profits are able to change the way they operate quickly to meeting the changing client base while the larger non-profits are able to expand into new areas and service lines.

While efficiency of the donation may be expected to be able to be accomplished on a larger scale many nonprofits are staying to their mission and finding qualified people willing to work for nonprofits at a wage they can afford. 

Photo by:  David Reece

Things are changing in the nonprofit world along with the change in times and the economy that we have experienced in the past few years.  Have you ever found that you are going to have to go through some big changes and are not sure how to keep everyone together.  Well Melany Brown of Executive Alliance has some suggestions to help you out.  She says, rather than thinking of it as a negative, think of the change as growth.  It is inevitable, but how you deal with that change is completely up to you.  So you need to try and think of things in a good way and help push on and not in a bad way that will bring you down. To read the entire article, please follow the hyperlink to the seattlepi web-page.

Chief Financial Officer of the Bill and Melinda Gates foundation announced on Monday that he will be stepping down early next year.  Alexander Friedman joined the firm in March 2007 ans saw it grow under his command.  A former investment banker, he will likely return to the private sector, but says he has looked at non profit and government work.

To read the rest of this article, please follow the hyper link to the Associated Press web-page.

pic by sketchy pictures

The marketing by a nonprofit organization to the most important assets the nonprofit has needs to do done with the idea of creating the organizations brand.

The most important asset are individuals.  Win the hearts and souls of individual supporters and they become your best promoters.

Trust and Transparency is the key component to have individuals feel.  It is no longer one message fits all or mass advertising to create volume.

Are you relevant to the individuals that you are reaching?

Keeping the individual  supporters you have, identifying new individual supporters and maximizing your return from the individuals are three simple goals to be measured.