How to balance reduced income with increased demand

Responsible Finance Management Holds the Key to Sustainability

Our research indicates that impact reporting is the one of the biggest problem areas in the sector. Many non-profits are failing to explicitly state their organisation’s financial performance indicators and objectives in their annual reports. This can lead to a crisis of accountability with devastating effects on a charity’s ability to build a sustainable future. These findings are supported by independent research already conducted on the UK charity sector.

The most obvious problem will be that you simply don’t know how much money you need. Without clear and detailed impact reporting, it will be difficult to estimate what your operational expenses will be for the coming year, even with a rudimentary budget in place. Dig a little deeper and you’ll find you may be wasting large sums of money on ineffective campaigns—money that could be better invested elsewhere. Better impact reporting will help you plan for the future and begin building a prudent reserve to help you navigate future crises.

Without detailed financial records, charities will also be at a disadvantage when applying for further funding. Because they will be unable to provide transparency to stakeholders, both internal and external, they will be a less appealing prospect than an organisation with better financial record keeping and projections. In an increasingly crowded funding landscape, this is a major problem.

This is the difference between sustainable and reactive approaches to finance management: The more detailed your bookkeeping, the more financial data you will have. The more data you have, the more informed your decision-making and planning process will be.

That is not to say that organisations with a sustainable financial model won’t face challenges. But they will be in a better position to get through them, and they are more likely to be able to do so without major changes to strategy.

In the end, a sustainable financial model is just another way of safeguarding your commitment to your beneficiaries, and your ability to provide services to them in these difficult times.

Improved Planning can Save Time and Money

The biggest obstacle to improving the level of organisational financial literacy is that of capacity. Many charities, particularly amongst smaller organisations find that they do not have the time or resources to dedicate to improving their finance management. Even if the leaders of these organisations can be convinced of the importance of improving finance management, without a change in process, this will seem like an unattainable goal.

Finance management software (such as Sage Intacct) can help to overcome these capacity issues by automating vital processes. This can help to free up worked hours, allowing workers responsible for the finance function a choice between improving their personal level of financial understanding and adopting more sophisticated processes (to deliver more detailed and valuable reports) and directing their efforts elsewhere, to help other areas of the organisation.

Better Finance Management Can Help Charities Continue Service Delivery

Among the central principles guiding charity leadership, the most important is delivering services to beneficiaries, as efficiently as possible. This means reducing waste, improving delivery mechanisms and cutting costs wherever possible.

Better finance management processes can achieve greater organisational efficiency, in the form of reduced waste and increased savings both in terms of time and money (taken together as ‘capacity’).

This can allow leaders to dedicate these resources elsewhere, improving the quality or extent of service delivery on offer.