9 fixed costs you need to calculate
May 18, 2015 The NonProfit Times
Everyone likes to have choice, and nonprofit managers like to have as many options as possible.
In real life, however, we often do not have an unlimited range of options, and when it comes to nonprofit operations, that can mean having to deal with many costs that are unavoidable or non-negotiable instead of having unlimited discretion.
Thomas A. McLaughlin, founder of the nonprofit-oriented consulting firm McLaughlin & Associates, offers advice about the fixed costs organizations face:
- Building rent. Usually these are large enough that they will be secured for years at a time.
- CEO salary. It’s the “base salary” that counts as fixed.
- The yearly audit. Auditors have a scope of work they must cover.
- Fixed assets. These can range from a vehicle to large pieces of equipment.
- Borrowing costs. The portion of a typical monthly payment that covers whatever percentage of the building purchase price was borrowed becomes a fixed cost, as does the interest owed over the life of a loan.
- Depreciation. This is one fixed cost that declines every month, so that the “cost” is not technically fixed, but close to it.
- Licensing and re-accreditation. The periodic costs for these become fixed costs.
- Certain consultants. Non-payroll specialists such as consultants can be fixed costs.
- Insurance (property and liability). It might feel like a variable cost, but it is so inescapable that it becomes a fixed cost.