Your Donors May Not Be Pleased With Your Cost-saving Measures

Your Donors May Not Be Pleased With Your Cost-saving Measures

The old saw "penny wise and pound foolish" is a favorite of mine.

A number of years ago, I was at a DMA Not-for-Profit Conference where a presenter was talking about the difference between Baby Boomer donors and the generation that preceded them (The Silent Generation). The Silent Generation's profile as a giver was that they gave because it was the right thing to do. For Baby Boomer donors, they gave but they wanted to see results for their giving. The point this presenter was making was that you needed to quantify and demonstrate the benefit constituents received from the donation for the Boomer. They hoped to see a philanthropic ROI from the nonprofits they supported.

I read a fascinating case study about a nonprofit, faith-based broadcasting network. They had been scrimping on expenditures by working with a half a dozen discrete internal systems for purchasing, cost accounting, inventory, budgeting, reporting, etc. They attempted to get a picture of their financial status by manually massaging data from each of these systems. Often there was data that was being entered into multiple systems, then pulled, then compiled manually. With an investment in a system that could integrate these functions, they saved countless hours of data input, received more accurate reporting with the click of a button, and decreased the time spent on departmental/program budgeting by a month!

The comment made by the staff accountant upon implementation of the new system, "we're delivering a much better return on each donated dollar."

So let's do a little back of the envelope math: a month's worth of salary and easily another month's salary that had been previously wrapped up in duplicate data entry. Compared to the cost of the system that they licensed, the system probably more than paid for itself in a few months time. And, they are able to make more potent decisions based on more accurate and timely data.

There is a mindset that not spending = good stewardship and "somehow, we'll get by." But that is an increasingly dangerous attitude to have. I bet the donors of the nonprofit mentioned above are thrilled that a one-time investment is netting long term effectiveness. Spending money leads to saving money by reducing error and inefficiencies resulting in more money for programs for the people that really need it. The people you've committed to serve, according to the mission statement.

The same penny wise pound foolish mentality abides in commercial organizations as well. Yes, you cut your phone bills by X percentage, but every phone call is barely comprehendible because you phone support team sounds like they're underwater.

Sometimes the best thing you can do to help those that you aim to serve is invest in better tools.

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