As banks and economists warn that the U.S. is barreling into an economic recession, nonprofit organizations face the daunting challenge of navigating business needs while staying true to their mission amid the uncertainty. Many are grappling with the double threat of sagging income and higher demand for services.
In an economic downturn, nonprofit income tends to drop as private contributions decline, government funding dips and earnings from endowment funds, together with their capital market values, plummet. At the same time, the economy puts additional demands on nonprofits’ already strained resources, as clients seek increased help and rates of volunteerism drop.
In response, nonprofits may implement budget cuts for fundraising and day-to-day expenses such as payroll, public outreach and overhead, in an effort to channel every possible penny into client services.
However, outsourcing business services is also a cost-effective way for nonprofits to forge ahead in difficult times while balancing organizational structure and mission.
Understanding the needs of nonprofits
A Meyer Grantee Back‐Office Survey finds that nonprofits, particularly small ones (with a budget of less than $3 million and a headcount of fewer than 20), frequently struggle to meet their non-core yet essential business functions. This was a common refrain in three areas.
1. Finance and administration – such as bookkeeping, accounting, and financial planning, budgeting and reporting.
2. IT – such as computer hardware and software procurement, maintenance, database management and support, website development.
3. HR and related processes – such as payroll processing, recruiting, personnel management and policy development.
Interestingly, the survey also noted that many nonprofits seek better business service solutions for less-recognized challenges associated with domains such as public relations, communications, marketing and fundraising, and development.
Sustaining NPOs in an economic downturn
There is no doubt that nonprofits’ income from virtually all sources, including philanthropy, sales of goods and services, grants and investment earnings, are threatened by a faltering economy. Meanwhile, the slump has exacerbated their ongoing need to find cost-effective ways to meet administrative requirements.
Moving to outsourced business services, which combine on-hand expertise and efficient completion of recurring tasks, presents a viable option for nonprofits in a recession and beyond.
Four ways outsourcing helps nonprofits reach the most promising outcomes:
By reducing operating costs. PayScale data shows the average full-time employee salary at a U.S. nonprofit is about $50,000. Factoring in IT support, equipment, training, benefits and more pushes that cost even higher. Switching to a reputable outsourcing firm for nonvalue-adding tasks lowers NPOs’ employee costs and provides a better value.
By boosting impact. Nonprofits are often resource-constrained, not just financially but in terms of human capital. Staff may have to divert their attention from their core duties to perform time-consuming yet essential administrative tasks, such as accounts payable and receivable or administering benefits. Outsourcing offers nonprofits a cost-effective opportunity to refocus human capital on the mission itself.
By providing access to technology, expertise. Hiring in-house staff to handle a nonprofit’s accounting, audit, IT, taxes and HR needs can crimp revenue. Outsourcing provides access to expertly performed essential business tasks, the latest technology and tools, and up-to-date professional insights.
By increasing agility. Grappling with economic uncertainty means nonprofits not only have to keep costs down, but they also must be agile to pivot as conditions change. By partnering with a professional outsourced services provider, nonprofits gain the flexibility to scale back processes as demand falls and to pick up again when required, without a significant capital investment.
Outsourced business services bring additional knowledge and professional resources to your nonprofit and can be scaled to meet its needs. In an era of prolonged economic uncertainty, outsourcing to a trusted provider can alleviate nonprofit leaders’ stress by helping the organization to run lean. In the long term, outsourcing helps NPO leaders to double down on their mission by taking time-consuming administrative tasks off their plate.
Want more? Escalon has helped over 5,000 companies and nonprofits across a range of industries to optimize routine business functions, like accounting and HR. Talk to an expert today.