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Procurement for Non-Profits — Everything You Should Know
- Non-profit organizations prioritize community development over profitability, relying on donations, grants, and federal funding for their operations.
- Non-profit procurement involves acquiring goods and services while following specific regulations.
- Non-profits often struggle to leverage their scale for discounts, but group purchasing organizations can help solve this problem.
Procurement for non-profits seems overlooked by many professionals as many are dealing with procurement for profitability opportunities. We always tackle best practices for procurement that are essential for the success of a business. Many have no clue that it is also the case for non-profit organizations.
For this article, we will explore what is procurement for non-profit organizations. We will check how it helps non-profits as they solely rely on donations, federal funding, and grants.
Reading this article will open your mind to what and how non-profit organizations work. You will be able to know how indirect procurement helps every enterprise besides those that are focused on generating profit.
Before we tackle what procurement means in non-profits, we must first know the focus of non-profit organizations.
Many organizations prioritize profitability above everything else. However, non-profit organizations are more focused on the development of a community.
Non-profit organizations are usually funded by donors, corporate donors, philanthropists, federal grants, and other members of the community.
There are two types within the sphere of non-profit organizations which are public and private. Public nonprofits receive or raise money through fundraising events and other activities. On the other hand, private nonprofits are funded through receiving investments from private donors.
Although there are two types of non-profit organizations, both can receive grants and tax subsidies from the government.
Procurement For Non-Profits
Procurement for non-profits is the same as the usual procurement as it refers to the acquisition of goods or services.
However, the difference for non-profits is that they need to follow regulations and guidelines that govern them. They need to follow regulations because it usually relies on private and public funding.
A non-profit organization needs to keep track of its purchases and payments to stay financially and legally compliant with the industry’s regulations. Additionally, it must report these purchases and payments with great accuracy and full disclosure.
Procurement for non-profits can keep the processes efficient, cut costs, and cycle times short to thrive in the industry as it is tied to a strict budget.
Common Problems in Procurement For Non-Profits
The following are some of the common problems for non-profits:
1. Regulatory Changes
Many organizations know that once it receives federal funding, they must abide by the rules and regulations.
But these rules and regulations usually change which means that your processes will keep changing too. Non-profit organizations need to do this to keep everything in regulatory compliance.
One of the regulations enforced by the Office of Management and Budget’s (OMB) Uniform Guidance is to formalize a procurement policy in writing.
In the procurement policy, the non-profit organization must clearly address its micro-purchase threshold and above this threshold.
Non-profit organizations need to identify purchases that exceed the threshold. This is due to the fact that purchases must follow a bid process and formalized solicitation.
If the organization uses sole procurement, it must justify its purchases by providing documents that will support it. Because non-profit organizations are expected to solicit quotes from various sources before it awards the contract.
The procurement policy needs to address the buying of duplicate or unnecessary items as it is against procurement standards to use federal funds for that kind of purchase.
These are some of the policies that are subject to change over time. That is why if the organization works to maintain compliance every time, regulatory compliance will not be an issue.
The organization must know how to address the additional regulations. This will allow it to adjust its process before the given grace period ends.
2. Limited purchasing power
Non-profit organizations are usually small operations. That is why it has limited purchasing power compared to larger organizations.
Having limited purchasing power means that they can only work with a few suppliers. Additionally, it lacks the power to buy in bulk to secure discounts which are detrimental to the procurement process of the organization.
Many organizations offset this by partnering with other non-profit organizations to create a group purchasing organization. Through this, they can increase their buying power which makes it easier to negotiate discounts with their purchases.
Increased purchasing power can help non-profit organizations save more money. The money that the organization saved can be used in other areas of the organization.
E-procurement For Non-Profits
The process of procurement for non-profits is detrimental, especially when it still uses the manual process of procurement.
E-procurement can help non-profit organizations speed up and streamline the entire procurement process. Here are some benefits non-profit organizations can gain from integrating e-procurement:
1. Budget and project support
We know that non-profit organizations have limited budgets and need to follow regulations to stay afloat.
A non-profit organization needs to show where all its money is being spent as it relies heavily on donations and grants.
E-procurement can help non-profit organizations by allowing them to see the expenses that impact their budget.
Additionally, the e-procurement solution can send warnings when the organization has exceeded its budget limit.
2. Transparency with all the procurement activities
E-procurement solutions offer full transparency into all the activities that the organization conducted.
It also allows the employees to gain real-time insight into the status of the approvals and orders.
3. More control
The organization needs to have tight control if it wants to stay compliant with all the rules and regulations circulating in the industry.
E-procurement software offers extensive control that includes the workflows in the organization. It allows the organization to send documents quickly while maintaining security over confidential financial data.
Additionally, the organization can configure the system or restrict certain purchases made by employees to control its expenses.
Procurement is essential for non-profits to efficiently use funds from donations, grants, and federal funding.
They face unique challenges, such as navigating regulatory changes and limited purchasing power. Collaboration through group purchasing organizations can enhance buying power, and e-procurement solutions provide transparency and control over workflows.
Adopting these practices leads to increased efficiency, transparency, and financial control, fulfilling their mission while ensuring responsible use of resources.
What is procurement for non-profits?
Procurement for non-profits is the acquisition of goods or services it needs while complying with the rules and regulations in the industry.
What is the difference between procurement for businesses and for non-profit organizations?
Procurement for businesses prioritizes profitability. On the other hand, non-profit organizations are more focused on developing communities.
Is it effective to integrate e-procurement in non-profit organizations?
Yes. E-procurement can help non-profit organizations to streamline their process resulting in the reduction of costs and faster procedures.
About the author
My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.