Why Nonprofits Need to Stop Obsessing Over Expenses

For some nonprofit leaders, it can be easy to spend too much time poring over each and every category of nonprofit expenses, carefully scrutinizing each dollar that’s spent. It can quickly become an obsession – and not one that will help you or your organization prosper in the long run.

So, how do you change your thinking about the funds that are flowing out of your organization?

Let’s take a closer look at the significant effects the issue can have and how to overcome them.

The Effects Expense-Obsession Has on Nonprofits

To be sure, overhead costs and routine expenditures are an essential part of any budget, and not keeping them under control is a certain path to trouble. But in some cases, nonprofit leaders need to take a step back and consider the reason they’re operating.

Charities and other nonprofit organizations don’t exist solely to be ultra-efficient in their spending – they’re around to accomplish their mission, whether it’s helping needy children, the environment, animals, or anything else. There’s an old saying that you need to spend money to make money, which is as true as ever for nonprofits. Like it or not, making an impact requires spending money, as long as it’s done smartly.

Obsessing over every expenditure also has a negative effect on employee morale and the organizational culture. If employees feel like it’s a fight to secure every single dollar, they may set their goals lower for their work and accomplish less.

Employees who think their leaders value their reserve funds more than their mission will also likely be less productive and motivated or even become so discouraged that they burn out of the industry.

Focus on Revenue Generation, Not Expenses

Most organizations can only cut so much from their spending while still functioning properly. However, the potential for growing revenue is nearly limitless with hard work and the right strategies. By bringing in more revenue, leaders can avoid worry and tough decisions over how to dole out limited money to worthwhile projects.

The methods will vary from organization to organization, but nearly every nonprofit has the potential to tap into additional funding sources or put in place new strategies.

Look to successful nonprofits in your industry for ideas or brainstorm among your team on how to amp up current fundraising. While organizations shouldn’t look at growing revenue as an excuse to spend carelessly, more funds can solve a great deal of problems, not to mention improve your reputation and impact.

Building a Culture of Revenue-Generation

As with all culture changes, switching from a cutting to a growth mindset starts at the top. Leaders should consistently be visibly working to optimize the revenue being brought in, including integrating advice and guidance from employees.

Another significant part of this involves empowering staff not just to identify potential revenue opportunities but also to pursue them in the best way possible. This also helps employees take ownership of their responsibilities, creating an even more dedicated and engaged workforce.

Over time, this kind of mindset becomes infectious, with new hires easily taking to the culture as benefits continue to compound.

Measure Your Impact, Not Your Overhead Costs

As we’ve noted, people start nonprofits to make a positive difference in the world, not make money or run extra efficiently. That’s why it’s dangerous to rely on low overhead costs as a benchmark for effectiveness.

Instead, leaders and stakeholders need to determine their own key performance indicators that best measure the impact they’re hoping to achieve, whether it’s:

• The number of events held
• How many people benefited from your services
• Projects completed

These should be objective and easily trackable, both to allow leaders to make the best changes and tweaks as necessary and also to provide real, concrete evidence to donors and board members about the direction of the organization.

Obsess Over Profit-Generation, Not Nonprofit Expenses

Obsession can be helpful for growing any organization – as long as it’s about the right things. For a thriving organization that’s growing its income, there’s no need to agonize over every single expense. Leaders need to be continually working to expand their fundraising, which can make achieving their mission so much easier than trying to slash budgets and find savings.

After all, revenue can grow without limits, while expenses can only be cut so far.

Still, keeping a lid on nonprofit expenses remains vital and can’t be ignored simply because you’re focused on growing revenue. Our experienced financial professionals can help with managing expenses to leave you more time to increase your income and expand your impact. Plus, they can provide guidance on selecting the proper indicators to track when charting your organization’s plan for growth.

Contact us today to see how we can help and get started toward ending that expense obsession.