Paul Sparkes outlines how using software to ensure transparent financial accounting can help drive a strategy for increasing donations.

The recession presented the charity sector with its greatest challenge in recent years as competition for funding increased and donor support dwindled. Even now, with the recovery underway, many charities still bear the scars of the economic crisis and find themselves operating in a new and daunting post-recession reality.

Increasing competition and a tightening legislative environment means that charities are becoming more and more accountable for every penny of their expenditure and the way in which they communicate it to stakeholders and the wider world.

In order to improve both transparency and stakeholder communications, charities should look to bring their operations together to create a leaner, more efficient administrative and financial infrastructure. Revisiting day-to-day operations and assessing where processes can be improved will help charities to survive and thrive.

Real-time, real difference

Access to real-time, accurate information will equip you with instant access to your charity’s finances, enabling you to prepare a wealth of reports for external scrutiny with confidence. The right software should reduce the length of time spent on reporting and enable you to present financial data as easy-to-understand ‘management dashboards’. By presenting information this way, you can share detailed, financial data to non-financial managers and trustees in a format they can easily understand and act on.

Having the right information from reports will also provide you with better measurement tools to show results from fundraising activities and the profitability of specific projects, to ensure that money on future projects is spent appropriately.

Protect your payments

Perhaps more so than any other kind of organisation, it’s vital that charities are transparent with their accounts. There are a number of important factors that need to be considered to ensure total trust from the public, the board and beneficiaries.  

It’s an unhappy truth that charities are often the victims of fraud or unscrupulous activity within their own ranks. Separation of duties will help you to maintain financial control by preventing fraud occurring from within. This approach means that no withdrawal can take place without two separate parties providing electronic approval and enables charities to closely monitor their finances in terms of where funds are going and exactly who they are going to. It also prevents rogue charities from being set up for an individual to transfer money to and funds being illegally transferred to an individuals’ personal bank account.

In turn, this will help to build trust so donors can be confident that their donations are not subject to fraud or wasted due to inefficient spending.

Transparency builds trust

It is crucial that you are able to be fully transparent with beneficiaries and service users. Whether it’s informal discussions or formal reporting, be prepared to be totally clear on and able to justify your spend. Clear reporting is vital to show trustees, donors and managers how and where money is being spent, to show expenses are being correctly processed and that the charity’s money is being spent wisely.

Using an independent auditor will also enhance your organisation’s credibility in providing transparent financial reporting for both internal and external audiences.

Shout about your successes

Finally, the finance function should work closely with the marketing and communications teams to ensure that an effective communications plan is in place to share relevant and timely information with your charity’s various audiences. After all, it is all well and good putting in place the relevant procedures to safeguard finances and boost income but you must decide how you are going to best communicate these measures to both internal and external audiences.

Looking forward

The new post-recession reality means that charities have an opportunity to improve and streamline processes which will allow them to take stock of current procedures, what’s working, what’s not and where improvements can be made.

Dwindling charity donations are often the fallout from a recession with consumers tightening purse-strings meaning they are less likely to put their hands in their pockets and donate. However, using the right software to streamline your accounts will provide you with easy access to your funding so you can see what money is leaving and what money is coming into your accounts. In turn, this will enable you to pull together a targeted strategy to drive donations, show transparency and set clear goals for measuring the organisation’s performance.

The hallmarks of a good charity, is one that is clear about its purpose and direction, promotes honesty from within and is prudent with its finances. By putting transparency at the heart of your financial operations, your organisation can demonstrate all of these values, encourage donors to resonate with you and safeguard donations both now and in the future.

Paul Sparkes is product director at IRIS Accounting & Business Solutions.