Charities overspending on finance functions, survey says

05 Dec 2017 News

Most charities are overspending on their finance functions, according to a report by accountancy firm RSM.

The report, called Funding and Functionality, finds that 72 per cent of charities with an income over £5m, and 62 per cent of charities under that level, are spending more than 1 per cent of their income on their finance function, above the corporate sector benchmark.

It says 40 per cent of these charities are spending over 30 per cent of their finance spend on manual transactional processing rather than “strategic investment in the team”.

According the survey, almost a third of charities are using over 11 spreadsheets to provide regular financial analysis and over three quarters are providing management reporting over ten days after year end, with a quarter taking over 20 days.

RSM says these figures show inefficiencies in charities’ finance functions, leading to excessive processing levels and delays to management reporting. 

Nick Sladden, head of charities at RSM, said: “An efficient finance function is core to the running of an effective charity; however, many charities seem to be spending a significant amount of income on an inefficient model.

“Efficiency, or lack of it, doesn’t just come down to monetary costs but using time in areas which add most value to the business. The reliance of manual processing is not only time consuming but it means the finance function has less capacity to input into the strategic direction of the charity.”

Sladden suggested that charities should instead invest in technology to automate some of their finance function.

He says that while this would require upfront investment, it would provide long-term savings and bring “increased accuracy” as well as “less risk”.

The online survey was conducted during autumn 2017 and drew responses from over 100 charities.

 

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