Finance & law, Finance

Improving your charity finance function

Our friends at Sayer Vincent provide an insight into making your finance team work more effectively.

Many finance managers wish they could spend more time actually planning – thinking about the business and contributing to strategy. Instead they feel bogged down by the basic-level bookkeeping, correcting mis-codings, chasing paperwork and producing endless spreadsheets. Sayer Vincent take you through how to improve your charity finance function.

So where to start? Break the overall task down into a series of manageable steps. You do not have to do them in a strict order and your own particular circumstances might help you to focus on the right area first.

1. Free up some time

A good first step is to stop doing something so that you can free up some time. Consider some of the reports you write – do people actually use these? One way to find out is to stop sending them – see if anyone notices! More seriously, it is possible to ask for a moratorium and you can pick the time when you do this – first quarter management accounts comparing actual to budget do not usually reveal much and so may not be missed by managers.

2. Analyse existing data

Could you analyse existing data further and present it a different way in order to provide some useful information for managers? This does not have to be complicated – a recent example was some analysis that a new finance manager undertook for a charity. He showed managers the level of take-up needed for a particular type of project to breakeven. The managers were astounded, as they had been asking for similar information for years and had always been told it was too difficult. Now they could look at their decision-making process afresh and develop clear financial criteria for closing projects and opening new ones. This was an important step for that finance manager, as he now has credibility with other managers.

3. Reduce the number of errors

It is frustrating for finance departments and other staff to waste time sorting out mistakes. Even if the error is caused by staff outside the finance department, it still reflects on finance and undermines the confidence others have in their work. Having demonstrated that the finance department can add value, you can now ask others to make changes to the way they do things. You will need to find out the cause of the errors. In one example, the cause was an old print out of the chart of accounts which was completely out of date, so people were using the wrong codes. For years, the finance staff had simply been correcting these codes.

4. Review where you are

A review would involve finding out more about the business and the organisation – get out of the finance department and ask other managers and staff what they think. The value of this action is in the message this conveys to others. You are listening to them – an important step. It does need to be followed up with some action, but this needs to be carefully planned to be effective, so do not over-promise at this stage.

Talk to the finance team and find out how the team members interact with other departments and staff in your organisation. Try to develop with them a step-by-step process to change the way you do things – involving them from the outset is much more likely to result in effective change and an improvement in your charity finance function.

Step-by-step approach to change in a charity finance function

Free up some timeCut down on the amount of time spent on transaction processing – standardise and simplify transactions so that you have a large number of similar transactions e.g. scrap weekly paid staff
Reduce errorsEducate users to reduce the number of coding errors and give managers read-only access to the accounts so that they can access more information for themselves
Improve efficiencyUse electronic payments wherever possible
Focus on the things that add valueFind out what managers want by talking to them. Stop producing some reports and see if anyone notices! Focus your time on communication with managers so you can tailor reports.
Know the businessGet out and find out more about the business. Then offer to help e.g. with a bid for a new project.
Take stockReview – if more managers come to you and ask for help, you are doing well.

Outcomes from the review

The review will give an objective and independent assessment showing where improvements can be made and:

  • Identify where information technology could be used more effectively
  • Consider areas where tasks could be re-organised so that they are streamlined and duplication of effort avoided
  • Look for ways of improving communication between finance and other departments
  • Develop the role of finance people to be coach and expert
  • Show where finance can add value

Reduce time on transactions

Finance departments spend the majority of their time on processing transactions, such as purchase invoices. You need to look for ways to reduce this time, for example, by standardising the process. Quite often processes have grown organically within organisations so that different sections of the organisation do things in different ways. The more you can standardise the processes, the more efficient you can become. Using electronic payments for salaries, staff expenses, payments to suppliers can cut down the administration time of sending cheques significantly.

Provide training and coaching for non-financial staff

Frequently, staff outside the finance department ask for long reports when they really just want to look up one number. Helping them to help themselves will save you time and they will have better and faster access to information. You can give them read-only access to the accounting system, so they can drill down and see transactions. Explaining more about the system and processes will prevent many misunderstandings.

Bigger changes

Some charities are going much further than just tweaking their existing systems – they have stopped producing the detailed budget packs that plague managers over the autumn and winter. Most organisations estimate that the whole budget process takes months and many hours of management time. Yet the value of the information created by this process is dubious. It is likely that the finance department could produce a reasonable first effort at a financial plan without any input from operational departments simply by looking at trends and past actuals. You then only need to ask managers “what’s new and different?”