Would you be interested if I can show you how to control hidden expenses in your nonprofit?
Boston Nonprofit had a surplus in a contract and decided to buy 100 Chromebooks for after school use at a cost of $50,000. Most public schools are using online homework assignments so After School programs need updated technology and more of it. The expense was not unreasonable but the After School homework time was about 60 minutes. Assume that the Chromebooks last two years and costs are hidden on the balance sheet with depreciation to account for breakage and use.
So would you agree that we should spent $50,000 and hid it on the balance sheet as an asset? That takes all the pressure off from management because leaders usually lead with data from the income statement. The balance sheet is more mysterious unless you’re in the accounting priesthood.
Over two years of use, each student is paying $250 per year or about $1.50 per school day for only one hour of use. If you were buying this computer for your kid, would you be ok with a computer that was used one hour a day? I’d work out a deal where she shares with her brother!
The balance sheet hides costs as assets. Makes you look richer. You’re not! You have $50,000 less cash than last week and you are getting very little use from what you bought!
A coach asked if leaders were comfortable with the cost for so little use. Boston nonprofit realized that the Chromebooks were a wonderful resource that was 95% available every day. They decided to think of the $50,000 as an investment that they had to recover since they only needed an hour a day. Control Hidden Expenses.
- An Early Childhood program in the same building was willing to use 50 Chromebooks in the morning for 3 hours and pay $150 per year or $7,500.
- A partner agency for job training was willing to rent 25 Chromebooks evenings for $1,000 per month or $12,000 per year.
- A nearby Charter School was interested to use 50 Chromebooks from 12pm-3pm for $15,500.
- A tutoring company used 50 units on weekends for $12,000.
The extra use drove up replacement and repair costs. The nonprofit expensed the entire set and sold the 50 remaining Chromebooks at the end of the year to a homeless shelter for $3,000.
Now, I’ve changed details to make an easier story, but what are the results?
Most people notice that the Chromebooks now cost the agency nothing because they got an additional $50,000 in rentals to match the expense. That’s not really the results that the coach saw. Can you see other results?
There will be added costs to record and monitor rental use – some software and a staff person to monitor storage and use
The cost that changed to an asset is the social impact. This one nonprofit used partnerships to take $50,000 spent on 100 students to 10x the value of social impact to change 1,000 lives
- Technology ages so the nonprofit is always buying the current year model which is usually faster. This empowers 100 students in homework
- Tutoring for college
- Job preparation for the unemployed
- Help with high school research
- Computer access for impoverished young children
- Communication for homeless.
Can you imagine the feeling of the Executive Director at the end of the year?
When I coach with agencies, I see 10x value from the assets all over the place.
Control Hidden Expenses. Let’s look at ignored costs for program directors. Often the flow of clients varies while the nonprofit is open. Boston nonprofit noticed that 25% of students leave the after school program an hour early. Their parents pick them up on the way home from work. They excused some unneeded staff early, but that had morale problems that led to quality and productivity loss. With their new understanding of costs. they weren’t ready to see staff stand idle.
Boston nonprofit started to discuss what to do with irregular student demand. They realized that Fridays were a day when many after school students were picked up early. They hired a staff member with a computer background who offered coding on Fridays when they weren’t needed for a classroom. Another staff member was needed half of the time for the later hours, so they assigned that staff member to plan trips and monthly themes. Those activities could be done at slack times instead of a rigid schedule. Other staff set up a tutoring schedule so some students with need had one to one attention.
When they compared notes with the day school, they realized that six months of the new approach had raised the report cards half a letter grade on average and reduced absenteeism in the day school by 5%.
Most of our nonprofits are able to do more than we even imagine. How many ignored costs can I find in your nonprofit? Would it be worth a challenge to see how many can be leveraged to change lives?
If this makes sense to you, click on the pic above to connect. I use the TurnAround Performance Platform with leadership teams. Meanwhile, thanks for the time together today.