Nonprofit Marketplace
Non-retail for Nonprofits
On this page:
1. Background
2. The Opportunity for Nonprofits
3. Benefits of the System
4. For More Information
The objective of Nonprofit Marketplace is to enable nonprofits to realize the savings that result from total cost management— the combination of increased operational efficiency along with the best possible pricing.
Combining the spending levels of the largest and the smallest nonprofits over one primary marketplace will maximize volume and therefore savings for all users. Removing the significant investment necessary for individual charities to create and support a technology and procurement management system of this type will allow significant savings.
More importantly it will allow the maximum return on investment for the small amount of time and fees involved in the launch process. The platform itself enables better management of the procurement process from “purchase to pay” saving valuable time and operational costs.
BACKGROUND
The nonprofit sector faces an escalating need to find both operational efficiencies and hard dollars as community needs rise faster than the pace of revenue generation. One area that holds perhaps the largest opportunities for gains, in both hard dollars and operational efficiency, is within the procurement practices of America’s charitable sector. Procurement is any activity related to the various aspects of spending money.
Think about it:
When an organization needs something, a pencil or security services, it exercises a series of activities to procure these items, which include vendor investigation and selection, determining items scope and selecting the right products, negotiation (for larger items), managing accounting functions such as coding the item to the proper cost center or general ledger (GL) area or grant source, dealing with approval processes, issuing purchase orders, paying invoices, etc. All of this activity represents significant time and process expenditures. As most nonprofits are considered small businesses, they generally lack the significant levels of purchasing needed to negotiate volume discount pricing.
In other words, nonprofits are, for the most part, paying full retail prices for the goods and services that they utilize every day.
Conversely, many for-profit companies get discount prices on many of their purchases such as office supplies, items needed to maintain buildings and facilities (MRO), cell phones, equipment, software, services (such as janitorial or fleet maintenance) and almost every purchased item apart from salaries. They receive these discounts by leveraging, through a few select vendors, the amount of spending power that they possess. In return for this volume of business, the vendor discounts its pricing accordingly. These discounts represent significant and immediate hard dollar savings of 5 percent to 35 percent and more depending on the category (printing, supplies, e.g.) of spend.
Although the obvious result of procurement is hard-dollar savings, the objective is total cost management.
There are a myriad of activities that cascade throughout an organization after a purchasing need has been identified. These small pieces of the purchasing puzzle add up to significant time resources—and time is money. For-profits have created software that consolidates purchase activity, much like online banking has consolidated bill payment.
Because staff is required to buy over a system, these platforms also drive compliance with vendor contracts thereby maximizing volume and preserving discounts. Platforms also allow flexible workflow, approval flow, coding and reporting by GL and cost center, so that purchases are allocated appropriately at the time of purchase rather than upon invoice, which speeds forecasting and improves accountability.
In the nonprofit world, these types of streamlined activities can reduce administration and therefore drive time savings for mission-critical activities.
In addition, these types of software platforms can separate purchases by grant source and functional activity creating a solid audit trail. Last, the system drives compliance, enabling management to examine spending processes, thereby increasing management effectiveness.
THE OPPORTUNITY FOR NONPROFITS
Generally, systems with the necessary platform, sourcing, legal contracts, support, and maintenance cost anywhere from $200,000 to millions, depending on the number of vendors/suppliers allowed to “sell” goods over the system as well as the number of users and complexity of the process.
Individually, few nonprofits can afford such a system because a sufficient return on the initial investment would not be realized in the short term, if ever, due to small purchasing volumes. Georgia Center for Nonprofits (the Center) has created a partnership concept that will allow nonprofits to share the costs of a comprehensive procurement system without incurring huge upfront costs and therefore realizing immediate return on investment (ROI). This accomplishes two things:
1. It opens access to nonprofits.
2. Because it allows a large number of nonprofits to access the system, it builds the dollar volume running through the system increasing the discounts and savings realized by users.
How do we know we can save nonprofits money?
Nonprofit Marketplace conducted an in-depth analysis of nonprofit purchasing needs, and based on this study, the Center has negotiated contracts with guaranteed savings levels (24 percent for office supplies for example).
For example, one large arts agency will realize over $250,000 in savings in the first year alone; similarly, a mid-sized social service agency will realize over $35,000 in the first year according to a spend analysis, which compared actual purchases with the discounts available under the Center’s contracts.
Nonprofits entering the system will be able to create a uniquely branded site for their own organization, access discounted prices from a variety of vendors and establish their own unique work flows, approval processes, and reports to track purchases and financial information to their unique needs.
In other words, nonprofits can customize the platform to conform to their organization’s unique structure and needs while benefiting from the pricing established using the aggregated volume of many nonprofits on the system, the best of both worlds.
FOR MORE INFORMATION
If you would to view an online demonstration of Nonprofit Marketplace or would like more information about how to sign up for this product, please contact:
E-mail: nmarketplace@gcn.org
Direct Phone: 678-916-3085
Outside Atlanta: 800-959-5015