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Tips for Tightening Your Organization’s Budget

As your organization puts a budget together for the coming year, it’s common to feel a renewed commitment to do whatever you can to cut expenses and tighten your budget. Whether your goal is to do more with an income that’s already relatively secure, or you find yourself forced to cut the budget as a means to organizational survival, here’s a method that guides you through the process:

Step One: Cut Costs

 “Reduce, Re-use, Recycle” – we’ve all heard the saying.  To begin planning to cut costs on an organizational level, we’re going to add two additional steps – “Re-Think” and “Reward”.

As you begin this process, utilize your staff’s creativity – gather them together away from their daily activities. Lay out the facts as they pertain to your organization, then ask for their help to brainstorm ideas. No idea is dumb!

Re-Think

Start small -- What changes are easiest to make? Remember, we’re talking about changing habits. A habit can be established in 30 days if you practice it every day.

What changes would have the biggest financial impact in your organization? Some ideas will be easy to do and can be implemented right away, and others will need to be part of a longer-term plan. As you brainstorm ideas, make a list of everything. Here’s one possible way to chart it out:

The columns we’ve used in our chart include:

Ease to implement (4 is easy, 1 is difficult)
Cost to implement (4 is low cost, 1 is high cost)
Potential cost savings (1 is low cost savings, 4 is high cost savings)

Cost savings is harder to accurately project. You may want to have someone in your office research potential cost savings as a special project. (Notice that this column awards the most points to LOW, not high as the other columns do. High points should go to the preferred result in each column).

Negative Environment Impact: If this isn’t a high priority for your organization, leave this column out.

Add additional columns to your chart for any other important factors to consider in making cost-cutting decisions. 

As you list ideas and score them in each category, you may find that there’s an important factor not listed in any column. Numbers 4 and 5 in the chart above record important information in the Notes column. If you find yourself adding a similar note more than 2 or 3 times though, go back and add it as a column and re-figure each item’s score.

Once all the ideas are listed and scored, add up the total for each line and arrange the ideas in a list with highest total scores first. The highest numbers are your first priorities to undertake. Some you’ll be able to “cherry-pick” and implement quickly; others will take longer and may need to be divided into steps.

It’s ok to reject some ideas outright or place some in an “Emergency Only” list. For instance, #4 above – Layoff Staff – might hold such onerous implications for your programs that you decide it’s to be reserved for “survival mode” only.

Rewards

At the end of initial brainstorming session, encourage employees to keep watching for ways to save $$. Consider rewarding individual employees for successful ideas by “rebating” back to the contributor 5-10% of the companies’ savings as a bonus at the end of the first year. (You’ll have to have some method of tracking this savings; or instead simply rebate a percentage of their salary (5%) or a fixed amount like a $500 flat bonus.)

Plan to deliver regular updates for the entire staff on your cost-saving progress. This may take different forms depending on the size and geographical spread of your organization. It might work best as an oral report in monthly all-staff meetings, or perhaps an entirely separate e-newsletter would work better. Resist the temptation to share this information only with upper-level managers – you’ll communicate the company’s commitment to the program and enjoy the greatest success if the organization’s top officer shares the information with every employee in the organization, right down to the lowest level.

Set reasonable goals, and celebrate when you make progress.  Use rewards that employees will value – and find out what they value by asking them directly.

Reduce

When buying equipment and appliances, consider both the purchase price and the cost to operate over the life of the item. Only then are you comparing apples to apples to arrive at the “cheapest” item. For instance, I think I paid only about $250 for our organization’s color laser printer. But I pay $360 every time I replace the toner cartridges, which might be six or more times a year. So my formula should be:

Purchase Price + (Toner replacement cost x est. number of replacements/year) = True Price
$250    +          ($360 x 6)                  =          $2,410.

A printer with a higher initial price, but with cheaper toner might be the better buy overall:
            $600    +          ($200 x 8*)     =          $2,200.

*Pay attention to how many copies each toner cartridge can be expected to print – they vary!

Every appliance and piece of equipment that uses energy is a good target for cost savings. Energy usage and the utility cost from using them can often be reduced through a combination of new technologies and choices. Since we’ve covered energy savings specifically in “Cut Your Organization’s Energy Costs”, also in this Exchange issue, we won’t cover it here.

If your utility costs are included in your office rent, don’t be fooled – you’re still paying for utilities through your rent. If this is your situation, you may want to talk to your landlord to see if he is interested in finding ways to lower his energy costs in exchange for a lower rent payment.

Interesting fact: Keep most of your office supplies locked up out of employees’ reach, and keep only one or two of each item on the “supply shelf”. Rather than taking 3 or 4 of each item and storing them in their desk, employees are more likely to take only one.

If you are at such a critical place financially that you’re facing having to lay off employees in order to cut costs, consider instead cutting everyone’s hours by some percentage (say 10%?) instead. This approach is better for morale because it keeps everyone in the same boat. If you cut employee hours, be specific about not creating or allowing an expectation that employees should still get their normal work load finished in the shorter hours. Instead, make the announcement that we’ll all be working with our supervisors to triage each employee’s work to preserve the critical tasks of the organization during the crisis. You need to all feel the pinch together – and then to celebrate all together when you’re able to restore everyone’s hours!

Re-use and Recycle

Some tips for re-using and recycling in the office include:

• PAPER – Remember when we thought computers would create “paperless offices”? Well, it hasn’t happened – we all use a lot of paper. Stack printed paper for re-use in printing drafts or in-house copies; cut it into note pads; shred it and take it home to feed your worm bin or compost pile. Re-use file folders and tabbed divider sheets; pull and save binder clips; make recycling easy for employees by providing designated bins and locations. Purchase a set of non-breakable dishes and metal silverware to replace paper plates and plastic utensils; eliminate paper towels and take turns washing a load of cloth kitchen towels at home instead.  

• Recycle toner cartridges – Office Max and other office suppliers have a toner recycling programs in place, and companies like Cartridge World and Office Depot sell high-quality refilled toner cartridges at lower-than-new prices. We’ve noticed no quality issues with recycled cartridges.
  
• Rent office space with open-able windows to eliminate the use of air conditioning and heaters, depending on the season.

Step Two: Deliver Existing Programs More Efficiently

To deliver existing programs more efficiently, consider these ideas to spur your creativity:

• Replace air or auto travel for training to training by webinar to save the cost of travel, hotel and meals. Same goes for out of town meetings for established clients (face to face is still best for new or prospective clients).
  
• Utilize e-mail and the web to communicate. Look into VoIP (Voice over Internet Protocol) to see if it could cut your telephone and long distance charges. At the very least, employees should use a phone card from Costco or Sam’s Club for long distance calls.
  
• Consider allowing employees to work from home one day a week (can phones be forwarded?) and lower utility costs for that day each week. Even some schools are going to 4-day weeks for this reason!
  
• Take a tip from the airlines: When you absolutely must raise prices, keep the price for the service the same but charge for the extras (like printed or downloaded workbooks; copying charges; long distance phone charges).
  

• And take a tip from the ice cream and candy bar makers: consider charging the same price for a slightly smaller amount.
  

Build in a Cushion

Be careful as you budget – it’s hard to know exactly how many expenses will go up, and it’s better to budget too much than too little as you make your projections:

1. Take a look at last year’s budget. In what categories did you spend less than the amount budgeted last year? These are categories you may be able to lower in next year’s year.
   
2. Don’t base next year’s budget on this year’s expenditures without including a percentage of increase due to rising energy prices.
    
   
3. Create a culture of stewardship in your program planning. Discontinuing a program when the costs begin to outstrip the benefit is good stewardship, because it allows you to put your funds into another place – potentially an efficient program that is more closely targeted to your clients’ needs.
   

Final Thoughts

The Funding Exchange’s Sustainable Pathways training provides hands-on guidance for a team of three officers from your organization as you:

• learn about the eight methods of fundraising
  
• determine which fundraising methods will be the best combination for growing your organization into a financially healthy one; and
  
• create a two-year plan with a written task list, complete with dates scheduled on a calendar and tasks assigned to specific people.
  

To arrange Sustainable Pathways in your community, or to register for a scheduled class, contact us at info@fundingexchange.org or call 907.451.0885.