As the COVID-19 pandemic surpasses the one-year mark since shutdowns began across the globe, much has been written about the strain placed on not-for-profits. As the worldwide economy slowed and many industries ground to a halt, charities faced a significant donation gap not seen since the 2008 Financial Crisis. According to CNN [1], non-profits are at grave risk as most do not have the cash flow necessary to operate for long periods without regular assistance like monetary contributions from the public or government grants. As more families are strained economically, the demand on these struggling organizations only grows.
Much news coverage has rightly been given to NGOs as they approach another Spring period where annual in-person gatherings like walks, runs and fundraisers may not be possible for the second year in a row due to pandemic restrictions. However, there is another lesser discussed crisis that is also greatly affecting the industry: job loss.
NGOs: A top national employer
Within America, the charitable sector is one of the largest employers, ahead of construction, real estate, transportation and finance [2]. In fact, it actually employs the same amount of workers as the manufacturing sector, an industry often used as a barometer of national well being. This job loss is rarely discussed unlike similar unemployment in sectors such as food service, airlines and retail. This is generally because NGOs operate with small budgets and staff to maximize their missions, often with little left over in case of unexpected emergencies. Additionally, some work that cannot be performed safely due to pandemic restrictions had to be indefinitely paused.
Why NGOs are less fiscally efficient
However, there is a way for these organizations to streamline their finances and save money – today. According to the Harvard Business Review [3], NGOs spend nearly 80% more than other comparable organizations to manage their finances. In some ways, this is understandable as many handle international payables and receivables which can be challenging. Additionally, they likely also spend the bulk of their time supporting their core cause without considering administration. Yet now is a critical time to streamline these aspects before costs threaten the entire operation.
Hidden costs: Foreign exchange rate changes
Another costly consideration is fluctuating foreign exchange rates. Another effect of the pandemic has been the unpredictability of rates which made sending funds overseas and budgeting much more difficult. Even large for-profit organization struggle with this factor but compensate by pushing costs onto their customers or simply absorbing the extra expense, neither of which is really possible with a charity.
What can be done to help NGOs?
Luckily, organizations both small and large have found ways to optimize their accounting processes to avoid spending excess funds in this area. Solutions do not need to require a complete overhaul of an accounting system or even a change. Simple additions, considerations and assistance from a third party could help an organization save money so they can continue their important work.
Source [1]: https://www.cnn.com/2020/03/20/opinions/coronavirus-extinction-level-event-charities/index.html
Source [2]: http://ccss.jhu.edu/wp-content/uploads/downloads/2019/01/2019-NP-Employment-Report_FINAL_1.8.2019.pdf
Source [3]: https://hbr.org/2013/04/the-efficiency-trap-of-global
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