Managing administrative costs are a challenging part of nonprofit management. As much as you want every cent of what you earn to go toward your cause, you need to invest in your nonprofit as you would any other business. On average, most charities spend about 36.9 cents on the dollar in overhead costs; however, this varies significantly based on the organization’s size and goals. One way to use your overhead wisely is to have other nonprofits raise money for you this is called pass through funds nonprofit and we will address it below.
A nonprofit needs money. When managed responsibly, nonprofits can use their administrative funds to grow in ways they otherwise couldn’t—making their efforts bigger and more effective. Don’t think of your administrative overhead as waste, but rather an investment in the development of your non-profit so you can do more. Here are some common admin expenses that are invaluable to your organization.
Payroll and Accounting Services
If you want your non-profit to grow, you can’t rely exclusively on volunteer labor. Volunteer hours are often limited and some nonprofits experience high turnover rates if they overly rely on volunteer skills. Plus, if your volunteers don’t have the skills you need for specific tasks (like accounting or medical care), you may need to hire someone to get the work done.
The nonprofit sector employs more than 14.4 million people and generates more than $801 billion worth of labor. Some estimate that $167.2 billion (26 percent) of that comes in the form of unpaid labor through volunteering. Even small nonprofits have to contend with payroll, HR, health care, and other costs.
Without money, you can’t afford to pay your employees and rely on volunteer labor. You also can’t effectively pay your staff without easy and effective payroll services that most private sector companies use.
Volunteer Onboarding and Training
Even if your nonprofit predominantly relies on volunteer hours (reducing your overhead costs and need for funding) you likely need to onboard new volunteers and train them on your mission, strategies, and policies. In many nonprofit channels, this training is essential for legal reasons. Civic engagement organizations have strict guidelines for voter registration, and child and animal welfare groups want to carefully vet their volunteer caretakers.
Investing in vetting, training, and onboarding means you will have effective volunteers that you can be confident in. They will help further your organization’s mission and take the burden off of others in your group. This is an investment in the success of your nonprofit.
Rent and Utilities
Whether you rent out a room in a small coworking space or have a sprawling campus, it’s important to factor in the cost of rent and utilities in your administrative costs. Most of these costs are flexible, though you may decide to invest in large, short-term expenses to save in the long term.
For example, some nonprofits are investing in solar power for their locations. They are either paying for the cost as a special project or applying for solar grants. The short term cost can reduce utility costs in the long run when the nonprofit produces its own energy. This is particularly valuable for environmentally-focused nonprofits that want to lead by example in their communities.
Nonprofits need funds to invest in administrative costs and overhead, and you shouldn’t be ashamed of spending money to better provide your services. As long as your team practices good stewardship of your grants and donations, your administrative costs will drive a return on investment that helps you advance your mission.
Pass Through Funds Nonprofit
This is when a nonprofit raises money on behalf of other nonprofits – and then it passes through all the funds it receives. Thus it is called pass through funds nonprofit. For example, a nonprofit might have a separate foundation whose sole purpose is to raise money for the nonprofit. This is a great way to save on Administration costs as the separate foundation can be wealthy individuals who are all volunteers thus cutting down on Development Director time and costs. Pass through funds nonprofit can also be taking advantage of days in the year where other nonprofits will match a donation you get.
Work with a company that has extensive experience with non-profit management. Focus on your mission and push forward while letting another company handle the administrative tasks. At Corban OneSource, we pride ourselves on supporting those determined to help others. Our HR outsourcing services include payroll management, benefits administration, compliance, onboarding, administrative paperwork, and more. Reach out to Corban OneSource to create and customize an HR outsourcing program for nonprofits that fits your needs and budget. We specialize in organizations with 75 to 6,000 employees.