Tips for Saving Money in the Back Office

by Anne Yurasek on February 02, 2010

3366720659_b746789dfdA recent project to help an Executive Director whose agency has had to downsize infrastructure to match a reduced program portfolio led to some interesting learning that I thought I would share. 

It is not difficult to determine the relative efficiency of a finance office.  The use of comparables can help a decision maker determine whether seeking further efficiency is likely to be fruitful.  Using personnel costs only (salaries and benefits), it is easy to compare the relative efficiency of organizations of different sizes.  Dividing the total salary and benefit cost by the numbers of dollars managed by this staff will yield a cost per dollar managed.   Use organizations in the same or similar industry and the same geographic location in order determine this cost so that prevailing wage rates are comparable.

In talking with CFO's from various organizations, we also learned about several ways that nonprofit organizations are working to reduce back office costs.   Certainly the most consistent and highest cost in a finance office is personnel.   What drives the number of personnel is the number of transactions that must be carried out and recorded.  One way to drive down the staff costs is to examine whether the number of transactions can be reduced.   The following are some ideas for ways to reduce the numbers of transactions:

  1. With careful safeguards in place, use credit cards for purchasing predictable products and services that cannot be bought in bulk.  While each item purchased will still be entered into the books with its assigned account number, use of credit cards reduces the number of checks that have to be written and recorded.   Credit cards in one agency are locked in a safe in the finance office and can only be taken out by program managers for specific purposes.  Choose   credit cards accounts can be monitored online. 
  2. To more efficiently manage petty cash, one organization is negotiating with its bank to set up debit cards with strict dollar limits. Again online monitoring is key.
  3. Examine your organization's payables list carefully.   Identify vendors who are receiving checks every month or more than once per month.   Can you aggregate these purchases?  Can you negotiate with the vendor to be paid quarterly?
  4. Use of   this entity aggregates donor giving and provides the charity with a single check.   Annual fund donations, as well as ticket purchases for special events can be set up so that the donor can make the donation or purchase the ticket on-line.  Use of this tool can reduce the number of checks recorded from hundreds to a few.
  5. Use of a bank sponsored scanner for deposits:  one agency, working through its bank, has purchased (one time cost of about $1000) a scanner that allows deposits to be made daily in the Finance Office without costly and time consuming trips to the bank.  The scanner also creates a deposit receipt.  The use of this tool greatly reduces accounts payable staff time, increases accuracy, and speeds up cash flow.
  6. Analyze purchasing to determine purchases that should be combined or bought in bulk.  This analysis is also helpful in discussions with strategic partners who might want to work with your organization around joint purchasing.  What are the five highest volume purchases that your organization makes?  Is there potential here to both reduce these costs as well as reduce the transaction cost to make these purchases?
  7. Work with your bank and payers on electronic fund transfers to speed up cash flow and reduce staff costs. 
  8. Do you use ADP or another payroll service?  Be sure to work with them closely to determine whether there is merit to using some of the ancillary service packages such as tracking earned time off, pension accruals, etc.   Tracking this information can be very costly in staff time and automating this function can also increase accuracy. 

What other tips have you implemented?  What would you recommend?

Photo Credit: AMagill

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