In this podcast, Mark talks about the importance of looking ahead and not just focusing on short-term survival.
‘Unless you’re looking forward you don’t know what’s coming down the track,’ believes charity finance expert Mark Salway.
You’ll hear how reviewing traditional financial models and investing in up-to-date finance tools can make all the difference to the efficiency of the non-profit sector in the face of profound challenges.
Mark urges charities to reimagine their financial models: the fundamentals of transaction processing (invoices and receipts, for example); the control environment (ensuring that transactions are properly coded, invoiced and accounted for at the right level); and the usefulness and timeliness of the management information coming out of the finance system.
The challenge here is that while commercial organisations typically take four or five days to close their month-end figures, many non-profits take four to six weeks.
The result is information that is accurate but not useful; it doesn’t help an organisation fully understand its costing and pricing, its cash flow, income/expenditure, reserves and surplus/deficit position.
To achieve more timely financial insight, non-profits can really benefit from good cloud finance systems. Such tools can do things like link the fundraising system to the finance system, meaning numbers don’t have to be rekeyed. They can automate the flow of information between different parts of the organisation, they can automate bank reconciliations so that transactions don’t have to be manually signed off, and they can ensure purchase orders are signed off at the right level.
Users can ‘slice and dice’ data however they want to: by projects, themes, regions, and teams, for example.
Mark emphasises the importance of forecasting – and re-forecasting. Charities tend to rely on historic financial information so they might not know, for example, how they would be affected by losing a large contract, or how they would fill such a hole in their funding.
Planning ahead is critical if non-profits are to survive the cost-of-living crisis and recessionary pressures, says Mark.
He suggests rethinking the traditional pyramid-shaped model where transaction processing takes up the majority of the time while management information and strategy get relatively little attention.
With the right tools, transactions can be processed far more quickly, freeing up time to focus on the vital management information and strategic thinking aspects.
Some non-profits are initially uncomfortable about making such a major change to the way they work – partly because of the perception that technology will put people out of a job. But as Mark points out, people get more out of their jobs if they are upskilled and trained in new areas.
Resistance to change can also stem from the perceived cost of new finance software. This leads to what the Stanford Social Innovation Review https://ssir.org/ called the starvation cycle https://ssir.org/articles/entry/the_nonprofit_starvation_cycle: where non-profits have invested so little in tools and infrastructure that they can’t grow.
“We have to break that cycle,” says Mark, who has often seen the ‘Eureka moment’ when non-profits realise the advantages of ease, speed, and efficiency that technology can offer.
“Organisations need someone or something to be the catalyst… By mapping out a vision and a road map, people see how they can improve. They then want to improve and go on that journey.”
Mark suggests that this process of transformation can start with a simple exercise. “Write down the words ‘process, people, technology’, map out what you think are the weaknesses in these areas and how they need to change… then do something about it.”
For more information, please visit: https://www.iplicit.com/.