The top three problems of poor financial management for not for profits

13th Jun 2019
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Not for profits are an important part of the social side of Britain’s economy – and they fulfil a whole variety of roles, from campaigning to service provision.

Sadly, all sorts of financial management problems can beset this sector. Strained resources may mean there isn’t enough salary available to pay people to adequately manage finances, creating a vicious cycle – while the constant threat of funding loss is always looming large.

1) Prioritise finance

Other than the largest and most mainstream not for profits, charities tend to experience resource problems of one kind or another. It’s not uncommon to find people at charities working on a contractor basis, for example, or to be working at low wages for long hours. This is understandable, but if finance leaders within a charity are having this experience then it can lead to high turnover, rushed work and important jobs like bill paying falling overdue.

As a result, it is worth doing one of two things – investing heavily in finance staff and prioritising their role, or automating some of their functions with finance software. By choosing the latter, you’ll often get the power of two or three staff members for the price of one – so it’s well worth exploring. If manual keying errors are happening a lot due to constrained work timeframes, for example, this could be the answer.

2) Business models

The most successful charities are, of course, operated like private businesses in terms of their strategy and business models – with the only exception being that they are not designed to turn a profit.

This means looking for revenue streams that can go the distance for a long time. Sustainability is key here, and for that reason it may be worth exploring whether or not your not for profit can open up any fresh income streams. Does your organisation have any space it can rent out, for example? Or can it operate a leaner expenditure budget – are there any programmes or events that, sadly, may have to be cut in order for everything else to run more smoothly?

A financial management package that can run intuitive models of how future business models may play out could be the tool for insight you need here. Without it, poor financial management is a real risk.

3) Selfish interests

Not for profits are almost always run for the good of a specific group or beneficiary. But anyone who follows the news will know that sometimes charities can sometimes be fraudulently misused, and without proper financial oversight in place, it sadly is possible for cash and resources to be squirrelled away.

This doesn’t have to be material fraud, either – sometimes charities are run as vanity projects. By getting a financial package in place that systematically monitors what spending is occurring and why, the risk of this is reduced substantially.

Not for profits are essential to the functioning of modern Britain, and without them there would be a hole in service provision. That makes it even more important that proper financial planning and management processes are instituted to avoid the problems outlined here.

Find out how we can support with Financial Management for Not for Profits