Charity Finance Teams Deserve Better Accounting Systems

Charity Finance

By Nick Longden

Charities find themselves under increasing pressure to maximise their own financial efficiency and support those in need. Tracking donations and grants, and stakeholder reporting consumes ever more time and resources. Nick Longden, Chief Revenue Officer at AccountsIQ looks at how finance can become an enabler in meeting the charity’s goals.

Amid the current economic uncertainty presenting unprecedented economic challenges, it’s arguable that no group has been more impacted than the charity sector. As inflation and economic stagnation drags down the living standards of households around the country, charities have to be twice as careful at managing their resources. Key to achieving this is taming their financial reporting obligations with the goal of ensuring that they can continue to provide the much-needed care that so many rely upon.

Charities rely heavily on donations and grants, so it’s important to effectively stay on top of these funding sources. This means tracking donations, generating donor reports, managing grant budgets, and ensuring compliance with reporting requirements. To unlock this level of visibility and accountability, charities need the right financial system in place, especially if they have operations spanning multiple global legal entities.

Charity finance is complicated

Given the uncertainty built into today’s fundraising environment, it’s fundamental for charities to understand their financial position on a moment-to-moment basis. To achieve this, they need visibility of what income and expenditure they have coming down the line to make the best decisions for the people who rely on their services. Charities typically follow the path of most organisations, by choosing basic accounting software at the early stages of their operation. Once they grow, or regulations tighten, the limitations of simple accounting software, or even spreadsheet accounting, are revealed and the search for a more complete solution begins. 

And charity accounting isn’t simple. They are required to follow Statements of Recommended Practice (SORP) and produce all the reporting that this entails. Likewise, there are stringent controls over spending and restricted fund requirements – where donors can specify how it should be spent. This can prove complex to track over extended periods of time.

As charities grow and operations multiply, there is no question that reporting becomes greater burden on a limited team, taking up valuable time that could be better served in other activities.

Accounting change is for the good

Therefore, successful charities have an understanding that in order to stay that way, they need their financial systems to grow with them. This can involve the difficult decision to jettison a previous entry-level system and import the data into a new cloud-based system that’s fit for a burgeoning operation with more complex requirements. More powerful cloud-based systems cater to the specific needs of charities and deliver the granular level of reporting that financial managers need to contribute to the success of the organisation.

Basic accounting packages, whether they run on a single PC or are hosted in the cloud, are unfortunately unable to provide the complex accounting and consolidation requirements that the sector demands. Charity finance managers are increasingly expected to deliver an extensive set of transparent reports, which are almost impossible to produce manually.

Streamlining reporting through automation means reducing the time spent on producing reports, which can be a significant benefit to the organisation. But it also means being able to provide real-time data, on demand to the rest of the organisation, therefore improving decision making.  It’s this combination of time saving and financial visibility that allows the financial team to do more data analysis and really add value to the organisation.

For example, being able to utilise dimensional data to deliver detailed reports to trustees, means being able to easily show precisely what each project is contributing to the organisation and how its impacting the beneficiaries of the aid. Dimensional reporting is a tool that doesn’t crunch data for the sake if it, the reports that it produces help to support the further development of the charity. 

Through automating away a large chunk of their chores, financial managers can actually find themselves taking back control of the financial department and being able to contribute to the strategic direction of the charity with confidence.

As well as time saving within the financial department, the efficiency radiates to the rest of the organisation. For example, purchasing operations can be streamlined, which are often very manual and relies on paper-based approval processes. The increased automation that finance teams offer can provide even more benefits, in particular as the team now has more time to collaborate with the rest of the organisation.

Joining up the operation

Key to developing a competitive advantage, and maximising the time and value of other key leaders and stakeholders within the charity, modern cloud-based accounting solutions integrate with other software solutions that the charity might be running, from the CRM that manages the donor database and marketing function to the grant management software, for example. 

As pressure grows on charities to continue providing much-needed care and services during this economic downturn, turbo-charging the finance function by delivering enhanced functionality and features is an important element of staying ahead. It takes the immediate pressure off the finance team and enables them to better contribute to the overall goals of the charity.

About the Author

Nick LongdenNick Longden has vast industry experience having spent a large portion of his career in Financial Management SaaS, with previous executive roles at Xero, Sage and CCH (Wolters Kluwer). Nick trained as a Chartered Accountant with PKF and regularly speaks at conferences advising accountants and finance professionals, in industry and in practice, on how they can leverage technology to maximise efficiency and productivity, as well as how they can use financial data to grow their business. Nick was previously Chief Sales Officer at FreeAgent.