Thursday, May 15, 2014

Do your "non-profit" customers ask for a discount on software or services?

By Steve Endow

I recently had an interesting experience.  A Dynamics GP customer contacted me to purchase some software.  They tried the software, liked it, and said they were ready to purchase.  They then asked if I could provide them with a discount.  Given that the software is priced very reasonably and there is no annual enhancement fee, I don't typically provide discounts.

Then they said they were a "non-profit" and a "charity" organization.  They help kids, you see.

But then I did some searching.  This is probably obvious to many, but was something I had never needed to know before:  Non-profit organizations in the US are generally required to file an IRS Form 990 to publicly disclose their financials.  I found an old copy of the customer's 990 form and saw that they had millions in dollars of revenue and millions in assets.  Not just a few million, but lots of millions.  Maaaany millions.  Bunches and bushels of millions.

Okay, so they may have lots of revenue and assets, but the services they provide are very costly, they claim to do a lot of charity work, and much of the assets and revenue appears to be related to a foundation, not the operational entity that handles things like accounting.  Who knows, maybe the accounting department is sitting on milk crates in a basement and using old PCs with CRT monitors (no joke, I had a client that didn't have enough chairs in their accounting department and I sat on a milk crate for a week).  I do have empathy for accounting departments with limited budgets!

But then I got to the page that listed the executive compensation.  The top executives were paid lots, and lots of money.  One was paid well over a million dollars.  In one year.  

Non-profit?  Charity?  For the kids?  I think they will do just fine if I don't give them a few hundred dollar discount.

As many people know, "non-profit" is just an IRS tax designation and doesn't mean that the company doesn't make a lot of money or doesn't have a lot of money, and it doesn't mean that they can't afford their ERP software or related consulting services.  And many executives at non-profit organizations are paid plenty of money, as I now know.

But when I hear "non-profit", I'm a sucker, as I still generally think of charitable organizations or community services groups that are hardly rich.  I have provided discounts to a few smaller organizations that happened to be non-profit, but clearly were not counting their millions.

So, when a customer asks you for a discount, what do you tell them?  How about when they tell you they are a non-profit?  What if they say they are a "charity" and "help the kids"?

Call me a skeptic, but from now on I'll be checking an organization's Form 990 before offering any discounts in the future.

I'm definitely not an expert, so if there is some important detail about non-profit organizations that I am missing that might justify giving wealthy ones a discount, I'm interested in hearing about it.

Steve Endow is a Dynamics GP Certified Trainer and Dynamics GP Certified IT Professional in Los Angeles.  He is also the owner of Precipio Services, which provides Dynamics GP integrations, customizations, and automation solutions.

You can also find him on Google+ and Twitter


Mark Polino said...

I've worked with a ton of not-for-profits. I'm on the board of one and my wife runs a small one.

For me it come down to this, any organization has to take in more money than it puts out. Running on the razor's edge to minimize costs is actually detrimental to any organization's mission. After that, how much is enough? That line is different for everyone.

Big organizations need talent to run well. Talent isn't always cheap. If an executive can bring in $50 million in donations is she worth $1 million a year? I say yes. Are there plenty of people who are way overpaid? Yep. As with anything, it depends.



Steve Endow said...

Hey Mark,

I agree completely--someone who can bring in $50 million may be a bargain at $1 million. I've read several articles about museums and similar organizations that pay top dollar for executives who can round up large donations from big time philanthropists.

But when an organization is at that point, I'm reluctant to give them a discount on a $2,500 software license just because they have a particular status with the IRS.

Such corporations may be non-profit entities for tax purposes, and may even be charities, but my thought is that they are hardly "charity cases".