The true cost of charity

You have to spend money to make money – this is especially true in the third sector. Approaching the subject of charitable expenditure (on staffing, utilities, fundraising and events – the list goes on) with supporters can raise red flags and doubt; in fact, the misconception that 100% of a charities’ total income goes directly towards their cause often results in scepticism and mistrust – but what is a charity to do?

Sheldon Gillmore

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With the media spotlight seeking any opportunity to criticise, a focus on complete transparency remains a priority for most third sector organisations. However, this is no easy feat. Managing public perception to an audience with little understanding of the inner workings and challenges of the third sector is complicated. Today, charities spend money in three main areas; governance, fundraising and trading, all of which support a sustainable future for the organisation. Failure to invest in these areas can impact income in the long-term; failure to be transparent about expenditure can also have a monumental impact on the reputation of your charity.

Communication with supporters goes a long way in both building reliable income streams and brand maintenance. However, all too often, regular and one-off supporters fail to receive any kind of recognition for their donations. For individuals giving to a particular campaign or service, for example, acknowledging their donation towards a specific area can be important. Equally, updates on campaigns, services and overall charity performance is a good way of building strong partnerships with long-term stakeholders. Sharing news in this way also serves as an opportunity to evidence the importance of charitable activities. Reporting on both the overall investment into an event and the money raised as a result, for example, serves to educate and reassure donors on the importance of charitable spending. For organisations reliant on trading (i.e. charity shops), there are a number of overheads; utility bills, rent, point-of-sale collateral and staffing – all of which ensure the sustainability of a vital source of income.

This level of detailed reporting remains a nice to have, rather than a need to have, for many charities. While fundraising teams are keen to maintain strong relationships with their supporter-base, often lack of resource makes it difficult to manage regular and informative communications. For many large charities, gaining a granular level of financial reporting is possible but requires hours and sometimes days of manual administration on a regular basis – and where there are manual and repetitive tasks involved, there is also room for human error.

However, a culture shift is taking place. With over-stretched local authorities, budget cuts, and uncertain funding, many charities are realising that underinvestment in financial software can prove to be a false economy. Today, innovative technology is supporting the third sector to improve efficiency, automate manual tasks and streamline clunky processes, all while strengthening brand and reputation. Designed with charities in mind, PS Financials support a number of multi-national charities to deliver intricate reporting, tailored to their individual needs, and manage partial VAT accounting quickly and accurately. The unified ledger system eliminates time-consuming manual data manipulation with automated reporting, efficiently providing insight into both restricted and unrestricted donations. Depending on your charities’ needs, the system allows unlimited customisable ledgers, in addition to the central ledger, integrating data to provide a real-time outlook of accounts.

With a new level of detail available at your fingertips, donor and funding reporting is no longer a chore. Instead, finance teams are empowered to strategically plan for the future, manage risk, maintain budgets and set smart targets, all while delivering tailored reporting to stakeholders. To find out how PS Financials can support your charity, get in touch.

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News and views, Not-for-profit