Key areas to consider in your finance function
1. Are the financial processes and controls currently in place fit for purpose?
If this is not considered prior to transitioning to a new accounting system, there is a risk that inherent inefficiencies and weaknesses in financial control will just move over to the new system.
The Charity Commission has recently refreshed their guidance on internal financial controls for charities.
2. Has training and support for the new system been considered?
It is vital that initial and ongoing training of users of the new accounting system is considered as part of the transition. Implementing an expensive and effective accounting system with minimal training for the finance team and others can lead to ‘work arounds’ when they can’t get the system to do what they want. Data taken out of the system for manipulation, additional spreadsheets used ‘off system’ and controls circumvented as they become too cumbersome, can all lead to a system that is even more inefficient than the one previously in place.
As well as initial training in the system, it is important to understand the level of support that you will receive from the software provider. This will ensure that any issues can be resolved quickly to avoid disruption for the charity, and that ongoing training and updates are provided.
The crucial need for charities to digitise their finance systems
Efficiency, or a lack thereof, doesn’t just come down to monetary cost. It also involves using time efficiently in areas that contribute most to the business. The advancement of AI and technology in the sector is why many leading accounting software brands have developed accounting software specifically for not-for-profit organisations. Moving to a more digital system comes with several benefits, including integrated reserve accounting, digital links to other key systems, and the use of AI to streamline transactional processing and inbuilt approval processes.
Many of these sector-specific offerings are also cloud-based systems, allowing authorised personnel to access the data and complete tasks anywhere, on any device. Great for a hybrid workforce!
An increase in digital processes means that the charity will need to consider the implications of this on cyber security. See guidance from the Charity Commission.
Charity trustees have a number of duties and legal responsibilities, as described in the government’s essential trustee guidance. Managing the charity’s resources responsibly is one of these.
Effective IT comes at a price and charities running older systems often make do with what they have rather than spend valuable funds on state-of-the-art technology. However, this may be a false economy where the overreliance on manual intervention and older generation accounting systems actually creates a cost envelope larger than the potential to invest in newer, more automated, and safer finance IT systems.
How can RSM help?
At RSM, our clients often ask us what the best finance system or automation tool is. There is no ‘right’ answer to this, as it very much depends on your needs, requirements, strategic objectives and future vision.
We can guide and support you through this process to enable you to select the right solution.
This article is part of RSM’s Charity trustee insights hub. It has some great insight pieces for charity trustees to consider on key topics right across the charity sector, including governance, reserves, digital transformation and finance function, to name a few.
If you would like to discuss the efficiency of your finance function, please contact Sharon Monteith, Cheryl Randles or your usual RSM contact.
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