How technology is making nonprofit buying operations more efficient and transparent

According to the State of the Nonprofit Sector Report by Forvis Mazars, an accounting and consulting firm, nonprofits are facing three big challenges: increases in operating expenses, lack of adequate finances and resources, and limited staff. 

An organization’s procurement practices directly impact each of these challenges. Inefficient procurement exacerbates rising costs, drains more resources than necessary, and overwhelms an already burdened workforce.

Technology can play a big role in improving buying processes for nonprofits. Modern procurement solutions have made it easy for some organizations to streamline buying workflows and improve spending visibility. It has also made it much easier for several nonprofits, of various sizes, to get more out of limited resources and maximize their impact. 

Creating Simple and Efficient Workflows for Buying Officers

Many nonprofits struggle with clunky and inefficient buying processes. When they exist, teams in charge of buying tend to be shoestring and are likely to be juggling several tasks at once. This slows down workflows and makes establishing consistent, cost-effective buying practices difficult.

Procurement technology may help change all of this. These tools help nonprofits obtain the supplies they need to carry out their mission when needed and in a manner that works best for the organization. Staff or volunteers are less likely to feel overworked and burnt out. 

It starts with better search functionality. The best purchasing solutions feel intuitive to an organization’s buyers. They have access to filters that allow them to sort out search results according to the specifics of their search. 

It integrates products from multiple merchants. Buyers do not need to visit a different website for every seller on their list — all the information they need can be found in one place. This also makes it much easier for them to compare offerings and get the best prices. 

Nonprofits that serve communities with goods, such as disaster-relief organizations, require large quantities of single items. Their purchasing tool should make it easier and more economical to buy in bulk, with options that allow them to get personalized offers directly from suppliers. 

Many nonprofits might require recurring purchase options for some of their goods. Food banks, for example, need a constant supply of food and drink products. Similarly, youth programs need to consistently stock up on learning materials or arts and crafts supplies. Purchasing tools could offer subscription packages from different suppliers, ultimately saving on budget. Buying teams can also create preset lists of merchants and products that make it easier and quicker to reorder items that they have purchased in the past. 

Enhancing Accountability and Transparency

Accountability and transparency in nonprofit buying is essential for building and maintaining trust with donors and with the public. Technology can help create clear processes and documentation that ensures compliance with regulations and prevents fraud. It may improve resource allocation for greater impact. Buying transparency can also be used by organizations to promote their ethical sourcing and fair-competition practices.

Procurement technology typically comes with an approval system. This is where a purchase request can be made by a buying officer but is only finalized once it is approved by a manager or team leader. This is particularly useful for large orders. Automated approval processes help strike a balance between ensuring enough oversight from management while still maintaining an element of autonomy for staff. Managers can view and approve purchase requests quickly and in bulk, helping avoid unnecessary bottlenecks. 

Team leaders and executives can design buying policies which can then be reflected in the procurement system. Buying policies and Guided Buying features can ensure that both buying and non-buying staff who need to make a purchase do so within the organization's guidelines. This could include anything from setting spending limits to having pre-approved merchants and product categories. 

Enabling Flexible Buying

Nonprofits vary significantly in size, in scope, and in the resources available to them. That’s why it’s important that a procurement technology solution offers flexibility in payment terms as well as tax exemptions. 

Extended payment terms make it possible for nonprofits to continue making purchases they need to carry out their mission even when resources might be constrained due to a dip in donations or delays in funding payments. 

Nonprofits qualify for tax-exempt status since they are classified as 501(c)(3) organizations. Organizations that qualify for this exemption simply need to apply it to their buying tool, making any eligible purchases automatically tax exempt.   

Providing Spend Analysis for Better Budget Management

Using buying software to make purchases also means that organizations have access to data which can provide valuable insights into spending. Most tools will provide users with dashboards for tracking purchases in real-time and for helping to visualize data in an easy-to-understand manner. These dashboards are a great way of maintaining a good level of spending transparency and communicating this to different audiences. Nonprofits can also create custom dashboards with different types of information depending on the stakeholder — whether it's buying staff, donors, or communities served. 

Organizations receive insights on spending patterns from the data collected, filtered by different time periods. Information such as total spending, savings, total number of orders, or main shopping categories used can help decision-makers identify the areas that require more funding. 

These insights also help to create better narratives for donors when fundraising. Organizations have data-backed information to help them make a case for why more funding is needed for a specific activity or purpose. 

Per Scholas Fine-Tunes Their Spending Process 

Per Scholas is a nonprofit that provides skills training and access to employer networks for individuals who are typically excluded from tech careers — particularly women and people of color. The organization realized that inefficient and costly procurement was a major barrier to achieving their mission. 

To tackle this, Per Scholas turned to Amazon Business to create a consolidated procurement infrastructure across campuses located in more than 20 cities. Amazon Business worked with Per Scholas to identify workflow issues and control unchecked spending. They set pre-approved budgets which increased transparency and removed the level of bureaucracy from every transaction making the purchasing process more efficient and transparent. 

The organization has also benefited from Spend Visibility, a feature available for Business Prime members. Per Scholas now has access to spend intelligence and insights into their purchasing trends. Budget and resource-related decisions are now made with data to back them up. Per Scholas has also leveraged Guided Buying to highlight and favor diverse sellers. The organization aims to increase their purchasing from diverse vendors from 10 to 20 percent. 

Originally published on The Chronicle of Philanthropy