We delve into the future of one of the most important (and often overlooked) areas of charity operations
This is article is sponsored by Sage Intacct - the nonprofit financial management platform that lets you pursue your mission more efficiently with a sophisticated multidimensional database that lets you aggregate transactions and activities across your nonprofit organisation.
With all the upheaval of the last year, you might not have spared much thought for the business of charity impact reporting.
You wouldn’t be alone. Research indicates that impact reporting remains a problem area for the vast majority of the UK charity sector. A study by Social Value UK found that whilst 17% of charities surveyed were reporting on outputs, and 68% were also providing information on outcomes, only 8% were going beyond this to report on impact. This illustrates the fact that impact reporting simply isn’t a big concern for most charities.
But in fact, impact reporting is one of the most important activities a charity leader must undertake. It is an opportunity to demonstrate the value of the work your organisation is undertaking - to trumpet your successes and to justify any requests for further funding.
Not to mention to compete for funds in an increasingly crowded landscape. COVID-19 has had an unprecedentedly disruptive influence on charity finances and has left an increased number of charities competing for a shrinking pool of funds.
In order to stand out from the crowd and secure funding from either public or private donors, charities will have to demonstrate the efficacy of their operations. There is simply no better way to do this than through impact reporting. With the fallout from the pandemic set to define the funding landscape for some time to come, charity impact reporting will be more important than ever.
The pandemic has transformed so many areas of charity operations. Now that charity leaders have an opportunity to take stock, it stands to reason that impact reporting will be one of the next areas to undergo this same process of radical digitisation that has changed the way charities operate in so many other areas.
Now is the perfect time to assess and evaluate your impact reporting processes.
The end of the year is a natural time for reflection, as charity leaders look back on what has worked well and what hasn’t and begin making plans for next year.
The second lockdown has placed a sharper focus on charities’ digital solutions and processes. For all its challenges and hardships, this lockdown offers an opportunity to evaluate and build better digital infrastructure.
In order to plan effectively for the coming year, charity leaders need a clear and accurate assessment of their current operational costs, and the impact their expenditure is generating.
The next era is likely to be defined by digital - even more than this one has been. Clear and detailed impact reporting is the vital first step on the journey to a more digital future.
If impact reporting is so important, then why isn’t the practice more widespread in the charity sector?
That’s a good question. And the answer is simple: charities struggle to find the time and resources.
In our whitepaper examining the status of impact reporting and overall financial literacy in the UK charity sector, we define this need as capacity. It was reported as the primary obstacle preventing charities from improving their financial management processes.
Digital impact reporting and finance management software (such as Sage Intacct) can help to overcome these capacity issues by automating vital processes. This will drastically reduce the hours needed to complete impact reporting and will allow those workers undertaking the finance function to improve their personal level of financial literacy and adopt more sophisticated processes in order to deliver more detailed and valuable reports.
In the increasingly competitive environment of post-COVID fundraising, we’re already witnessing a kind of fiscal Darwinism.
There have been widespread and troubling reports of charities having to cease operations or lay off staff.
When funders (both public and private) have to make a choice between charities to support, they are more likely to give funds to the one that can prove the efficacy of their programmes and provide reasonable predictions and benchmarking for future expenditure.
Charities that have digitised their impact reporting processes will be at a huge advantage here, as it will be far easier for them to provide this information and it is much more likely to be of a high standard.
Think of this as just one part of a wider strategy of digitisation. The dichotomy facing charities at the present moment is the need to reconcile increased demands on services with reduced income. The key to overcoming this is digital.
Digital allows charity leaders to stretch resources further and to do more with less. In the future, impact reporting will be treated as a digital process just as we have seen charities come to regard fundraising and service delivery as such over the course of the last year.
This painful process may yet lead to a stronger and more resilient future for the charity sector.
Greater transparency and accountability are the future of charity impact reporting. This is just one part of a greater cultural change, as charities seek to move away from the paternalistic strains of the traditional model: as organisations work with their service users, rather than on their behalf.
We are beginning to see green shoots of this process in other areas of charity work, such as community fundraising, peer support, people-first content and an increased focus on ethical fundraising practices.
Detailed impact reporting clearly demonstrating expenditure and efficacy is an integral part of this wider cultural change. By providing a greater degree of transparency, charities can involve their supporters in strategic decision-making and allow them to have a greater say in how the organisation is run. And, with instant access to real-time insights, stakeholders can quickly see what’s happening across the organisation and make more accurate decision fast.