Over spend, lack of investment and inefficiency presents a perfect storm for charity finances, warns RSM

The majority of charities are spending over the corporate average on their finance functions. Whilst on the surface this may appear positive, significant amounts are being spent on manual processing of transactions rather than strategic financial advice – presenting a perfect storm for the financial health of charities, warns RSM. 

The statistics, taken from RSM’s Funding and Functionality report, highlighted that 72 per cent of larger charities and 62 per cent of smaller charities are spending above 1 per cent of income - the average corporate sector benchmark - on their finance function. 

However, 40 per cent of these charities are spending over 30 per cent of this on manual transactional processing which highlights that the spend is going into processing time rather than key strategic investment in the team. 

The survey also shows that almost a third of finance functions are using over 11 spreadsheets to provide regular financial analysis and over three quarters are providing management reporting over ten days after year end, with a quarter taking over 20 days. The figures uncover inefficiencies across the finance function which is leading to excessive processing levels and delays to management reporting.  

Nick Sladden, head of charities at RSM, said:

‘An efficient finance function is core to the running of an effective charity; however, many charities seem to be spending a significant amount of income on an inefficient model. 

‘Efficiency, or lack of it, doesn’t just come down to monetary costs but using time in areas which add most value to the business. The reliance of manual processing is not only time consuming but it means the finance function has less capacity to input into the strategic direction of the charity. 

‘The level of spend could be better invested into innovative technology to automate certain areas of the finance function – bringing increased accuracy, less risk and cost efficiency, plus providing precise, up-to-date information that will allow charities to be more flexible and nimble when making strategic decisions. Such an approach requires upfront investment but provides savings in the longer-term.’