We hope you have included Technology in your budget, if you haven’t there is still time. While budgeting for technology it is important to understand the difference between Capital (CAPEX) and Operational (OPEX) expenses. Here’s why:
A capital expense is money spent to acquire or improve a long-term asset such as a new building to host your classroom, books for your library, or a car to transport your clients. Technology capital expenses are computers, servers, and some software. Typically nonprofit organizations fundraise through campaigns and donors to pay for these types of expenses.
An operational expense is money spent on the ongoing costs of running a business or organization, such as your electricity bill and employee wages. These are things nonprofits typically do not fundraise for. Donors tend to want their dollars to go towards materials directly related to your nonprofit’s service such additional beds for your shelter or materials for your classroom – not your electricity bill.
You may be thinking, yes I know the difference between capital and operational expenses. What’s your point?
Well, nonprofits are used to budgeting for technology as a capital expense but more and more cloud-based solutions are becoming available to nonprofits, thanks to corporate donations and discounts, and nonprofits must move some dollars in their technology budgets from capital to operational expenses to take advantage of these systems.
Although they are discounted and donated, cloud-based solutions still entail some costs. These costs often come in the form of monthly payments for licensing and will be considered operational. So perhaps you’re planning on getting rid of that on-site file server to migrate to Office 365 for Nonprofit’s SharePoint or Box.org. Moving to either SharePoint or Box.org could entail costs for file migration (implementation) and possibly monthly licensing costs. Overall the monthly operational cost and implementation will most likely be less expensive than maintaining your server – not to mention the capital expense of replacing it one day.
As a leader in your organization it is important that you’re able to explain why your technology operational expenses are climbing due to switching to cloud-based solutions, how an increase in cloud operational expenses will eliminate more expensive capital expenses and why that operational cost deserves funding just as your technology capital expenses do.
Here are some benefits of cloud-operational expenses:
- They’re cost effective – you’re getting enterprise level technology at the fraction of the cost it took to maintain and replace your server
- They’re predictable – After the initial costs of implementation, you’ll most likely have to pay per user/per month for licensing. You won’t have to worry about unpredictable maintenance.
- They’re scalable - Often you buy a server to handle a certain number of users. It is simple to set up new employees on cloud-based solutions – and you don’t have to worry about maxing out a server’s capacity. It's much easier to add individual licenses for new employees than to buy a new server.
- They’re better – cloud solutions use the latest technology for accessibility and the best security available not to mention that upgrades are constantly being included in the system without major overhaul or disruption in service.
If you have questions about your technology budget, cloud-based solutions, or anything else nonprofit tech related contact firstname.lastname@example.org.
Have you included Technology in your budget this year? If not, it’s not too late, join Tech Impact’s Director of Technical Services, Linda Widdop, to learn how to include technology in your nonprofit’s budget.