When the COVID-19 pandemic forced lockdowns in Spring 2020, many nonprofit organizations initially resisted laying off employees. Retention tax credits provided under the CARES Act helped. But nonprofits that are still struggling may think they have no choice but to cut compensation expenses, especially as high inflation increases the cost of other expenses.
However, your organization may still have alternatives to terminating employees. Here are some ideas for organization-wide cost cutting.
Staffers and office expenses
Before you lay off workers, first consider reducing hours or suspending employee benefits. You might trim wages or management-level salaries. And, allowing employees to work remotely may lead to lower overhead, particularly if you’re able to break your office lease or at least shrink your space.
Approach your landlord about renegotiating, especially if you’re nearing the end of the lease’s term. The market for commercial real estate has faltered in the wake of the pandemic, so landlords may be more amenable than they normally would be to rent reductions, abatements or holidays.
If your organization has more than one site, you might want to consolidate in a single location and close the others. If you can’t escape the rent obligations for the shuttered space, you could at least eliminate the associated overhead, including insurance. If your nonprofit owns its facilities, look into selling, downsizing or renting out unused space.
Negotiating with vendors
Also try renegotiating with vendors. If you shifted to greater remote work, for example, you’ll have less need for property maintenance and food services. Check for penalty or fee provisions in your contracts before terminating agreements, though.
It also could pay to join forces with other organizations, nonprofit or not, to increase your buying power. Or you could consolidate more purchases of goods and services with fewer vendors to obtain discounts. Don’t hesitate to be assertive in the pursuit of lower prices. It can’t hurt to ask your vendors to offer nonprofit discounts or to donate their services.
Make virtual permanent
Many nonprofits have experienced significant decreases in expenses for travel, meetings and events as gatherings were forced into virtual spaces. As with remote work, you may have been surprised at how well virtual meetings and fundraisers have worked. In fact, some report their virtual events have been more lucrative than past in-person events.
For example, one organization canceled its annual luncheon and instead simply requested donations from the usual attendees. It resulted in a substantially larger haul than a typical event would have. Other nonprofits have been able to attract higher numbers to virtual runs or walks, where participants perform the activity on their own at a day and time that’s convenient for them.
Crunch time
Obviously, no nonprofit wants to lay off good employees. If your organization is in a financial crunch, contact us. We can review your budget, revenues and assets and help you make the best decisions about how to proceed.
How HoganTaylor Can Help
The HoganTaylor Nonprofit team of business advisors and CPAs is comprised of former CFOs, controllers, and industry experts with extensive experience providing the guidance organizations need to lean forward again in their leadership. If you have any questions about this content, or if you would like more information about HoganTaylor’s Nonprofit practice, please contact Jack Murray, CPA, Nonprofit Practice Lead.
INFORMATIONAL PURPOSE ONLY. This content is for informational purposes only. This content does not constitute professional advice and should not be relied upon by you or any third party, including to operate or promote your business, secure financing or capital in any form, obtain any regulatory or governmental approvals, or otherwise be used in connection with procuring services or other benefits from any entity. Before making any decision or taking any action, you should consult with professional advisors.
