Maximizing impact: Cost containment strategies for not-for-profit organizations

As not-for-profits move forward into 2025, economic uncertainty and challenges continue to be conversations with organizational leadership and the board of directors.  Regardless of an organization’s size, operating margins and bottom-line profitability are still key to sustainability. 

While many organizations actively monitor revenue sources by carefully tracking program revenue, contribution support and donor engagement, they still face challenges due to continually rising operational costs. Not-for-profit organizations may see an improvement in their financial health by adopting various cost containment strategies.

Nine effective strategies for not-for-profits to reduce costs and boost their bottom line:

1. Operational efficiency: In the early 2000s, many organizations adopted Lean Six Sigma exercises to improve processes and eliminate operational waste. However, these processes should be routinely revisited. By automating routine tasks and optimizing workflow processes with the help of AI, significant efficiencies can be achieved.  This approach can lead to reduced labor costs and increased productivity through careful review of organizational structure and staffing.
2. Expense management: Regularly review and renegotiate contracts with vendors and service providers to ensure competitive pricing. Assess ongoing subscriptions to determine their necessity. Implementing stricter expense policies can also help control costs. 
3. Energy efficiency: Consider investing in technologies to reduce energy costs. Simple measures, such as switching to LED lighting or optimizing heating and cooling systems, can lead to significant savings.  For a more substantial transition, consider installing solar panels on your facility.  In addition to federal Inflation Reduction Act tax credits, many state and local grant programs exist to assist with these energy improvement projects. Find out how your organization can leverage IRA energy tax credits here.
4.  Volunteer engagement: Increase the use of volunteers for tasks that do not require specialized skills. This approach can help reduce payroll expenses while maintaining service levels and fostering greater volunteer engagement.