Running a non-profit (NP) these days requires strong expense management competencies. Operating budget parameters are largely dictated by Funder agreements and, for now, very few NPs have social enterprises that would require a revenue generation focus.
Fixed and Not-So-Fixed Costs
Over time, the Finance function has become increasingly sophisticated at managing the fixed costs associated with the tools of production in a typical office environment. For example, there is a growing trend in the use of membership-based approaches for addressing procurement and back office support needs.
But unlike material costs, labour cost can be more variable and requires more cross-functional teamwork to paint a clearer picture of future organization liabilities. Proposed workplace legislation like Bill 148, Fair Workplaces, Better Job Act 2017 (Bill), will no doubt compel the Human Resource (HR) function to take a closer look at the fixed costs under its purview. Specifically, those related to compensation and employment practices governed under the Employment Standards Act including vacation entitlements and paid personal leaves.
Finance and HR management peers will then need to discuss the Bill’s impact on operating budget accruals and reserves. Then they will meet with the Leadership group to review the organization’s financial plans relative to these collective insights – after all, any increase in future liabilities might require some current state cost-cutting measures.
Then the Leadership group will have to communicate changes in future expense obligations to key stakeholders – like Funders. Funders, having gone down this workplace legislation road before, may have already begun to forecast the Bill’s impact on the (HR) operating expenses of their current inventory of recipients and will adjust their funding model to compensate: remember the NP sector impact of the Proxy method for Pay Equity compliance? Enough said.
Expense Management: An Opportunity to Broaden Donor Relations
Finally, against the backdrop of a workplace culture that is continuously focused on expense management, the Leadership collective might bring the Development function into the picture and possibly kick around the idea of having a dual purpose for that function going forward. After all, up to this point, its focus has been on fundraising not expense management.
Like estate-planned annuities that are tied to specific programs/causes, perhaps there is an opportunity to create a similar product that will broaden the current Donor focus to include expense management?
By Dave Nanderam, Managing Partner, ASSOCIUM Consultants. Through our collaborative approaches, innovative HR products and customized advisory solutions we impact four leadership priorities: managing risk, driving productivity, strengthening talent capabilities and supporting your bottom line. Let’s connect to find out how ASSOCIUM Consultants can help your organization.