Cost Saving Study
Over the past decade non-profit organisations have found it increasingly difficult to raise funds, and this is going to become even more challenging in the aftermath of the COVID-19 lockdown. Failing economies, reduced profit margins, job losses, and existing funds being re-directed will shrink the availability of funds substantially.
If organisations are to survive, they will need to identify new and innovative sources of revenue. Because of this, a major focus for many NPOs now is trying to find ways to make themselves more self-sustaining. The options of commercialising parts of their service delivery, offering training in their field of expertise, and producing and selling products are all possibilities.
Another route many organisations are considering is staff cuts. Retrenchments, especially when instituted to save costs, is often a painful process, and has the added disadvantage in that it is usually at least three months before any real savings can be achieved. What also needs to be considered is the negative impact retrenchment packages can have on any financial reserves as well as cash flow. However, the thinking is correct it is prudent to bring down monthly running costs to strengthen sustainability, and what many NPOs are overlooking are ways of reducing general overhead costs.
Most NPO’s have agreements and contracts in place for their general expenses insurance, banking, printers, telecoms, IT, groceries, travel, etc that are offered at competitive rates in relation to the market, often even special NPO rates. This has led most organisations to assume that there is no point in reviewing these costs as the exercise would yield little, if any, results.
Two years ago, a team of experts with a rare set of skills set out to challenge this assumption. Working with two large, national NPOs with forward thinking management teams, KuTh Consultants undertook a review of a wide selection of mandates with some startling results. Since then, KuTh has worked with a number of other NPO’s, both small and large, achieving the same results:
- An average reduction of 34% was realised in annual spend across all the NPOs assisted.
- A total of 15 mandated areas (for the full list see https://kuthconsultants.co.za/what-we-do/) were reviewed, and in every instance (100%) savings could be made.
- Interestingly, the same suppliers were retained in 95% of the cases after better rates were negotiated. In the few instances where new suppliers were indicated, existing contracts were able to be cancelled with no penalties.
- Audits conducted as part of the process revealed numerous incidences of incorrect billing, resulting in a combined cash refund in excess of R3 000 000.
These results have obviously led to a demand for this service, so the consultants have made themselves available to assist a few NPOs every quarter. There are no fixed charges for their services as the work is done on a continency basis.
KuTh Consultants are a group of technical experts that assist companies and non-profit organisations to improve their performance by increasing productivity, reducing costs, optimising processes and increasing profit.