Imagine you walking into your new financial adviser’s office. You’re nervous about entrusting your money to someone, but you’ve heard good things about this guy. At first glance, his office seems well-organized. When you start looking closely, though, you start noticing some details that concern you. It takes a while for the secretary to greet you because she’s struggling with their old copier. The office computers are old and the files look like a mess. When the secretary finishes at the copier, she has a hard time finding your information because her ancient computer is acting up. She finds your file eventually, but your information is incorrect — she apologizes and explains she hasn’t updated her software recently. By the time you’re actually able to meet with your adviser, your impression has changed; you’re concerned about how well he can manage your money when his business seems outdated and inefficient.
You wouldn’t be wrong, either. The old adage “You have to spend money to make money” still rings true today; consumers expect the businesses they support to be efficient, well-run, and up-to-date. Businesses that are well-equipped to manage their affairs usually outperform other businesses who don’t invest in their day-to-day operations.
If businesses are expected to invest money to make money, why is that different for nonprofits? You can preach about the “nonprofit starvation cycle” until you’re blue in the face, but nonprofits are still expected to raise money for their cause while maintaining a low overhead. That prevents nonprofits from investing money in the resources they need to make the most of their fundraising efforts.
The expectation that nonprofits spend little money to raise a lot of money causes a lot of organizations to fall into the mindset that they must save money at all costs. It’s easy to get into the “penny wise, pound foolish” cycle, where short-term savings don’t make up for lost opportunities in the future.
So how do you decide how to spend your valuable administrative budget? Here are a couple of ideas:
1. Decide What You Need
Figure out what parts of your operation are the best places to invest your money. If you spend a lot of time keeping track of your clients or struggle to keep donor information current, a good donor management system might be a place to start. Maybe your staff spends hours and hours keeping track of your books; investing in a good accounting software or hiring an accountant might be a good move. Identifying key areas of your nonprofit’s operations that need improvement will help you make wise decisions.
2. Shop Around
Okay, so you need a donor management system. Do your homework; there are lots of different options out there! Before springing for the least-expensive one you find, take a little while to figure out how it will affect your organization’s workflow. It seem like a great price, but if it takes up all your staff’s time, the few dollars you save on that cost could be negated by the hours your staff use to keep it up-to-date. With any service you use, make sure it makes your life easier instead of more complicated.
3. Keep Your Donors Updated
If you’re worried about negative reactions from your donors when you upgrade your services or equipment, mitigate the stress by keeping them informed. It’s even better if your update includes a word on how your investment ties to your cause. A little information can go a long way, even if it’s just a quick snapshot of a staffer with his new computer or a few lines about how your new equipment will improve fundraising for your cause.
4. Track Your ROI
There are a thousand different ways to track the return on your investment, or ROI. If you bought new donor management software, for example, you could compare the cost of your investment to the amount you would pay your staff to do the same tasks without the program. Keeping track of the returns on your investments will help you decide what improvements to make in the future and where you can afford not to spend your budget.
5. Audit Yourself Regularly
Tracking the ROI on your new investment is important, but auditing all of your spending on a regular basis is important. It can help you get rid of redundant costs, identify services that no longer work, or cull ineffective fundraising methods. Think of it as spring cleaning for your budget.
Nonprofits face immense scrutiny when they spend their money. That doesn’t mean you need to scrimp and pinch at the expense of running a successful organization! Making informed purchases, keeping donors up-to-speed, and double-checking your spending will help you stay relevant and successful.