Charities Financial Outsourcing Funding

Essential Reading: Income and Volunteering Challenges in the UK Charity Sector 2023: Building Better Series

Income and Volunteering Challenges in the UK Charity Sector: A 2023 Guide

Challenges Facing Not For Profit Organisations | Challenges Facing Charities in 2023 | Third Sector Challenges

In a world increasingly characterised by economic uncertainty, the charity sector plays an integral role in providing support and relief to various segments of society. However, charities in the UK today face significant challenges, notably in terms of income generation and volunteer recruitment and retention.
This article aims to shed light on these challenges, their implications, and potential strategies for overcoming them.

Income Challenges in the Charity Sector

In the past few years, charities have grappled with various economic hurdles affecting income generation. Two main areas of concern have emerged: a decrease in public funding and increasing competition for donations.

  1. Reduction in Public Funding:
    Public funding has traditionally been a critical source of income for charities. However, recent years have witnessed a gradual reduction in this funding due to government austerity measures and budget cuts. This situation has led to a significant resource gap for many charities
  2. Increasing Competition for Donations:
    With over 168,850 charities in the UK, competition for donations has become fierce. Economic downturns and the COVID-19 pandemic’s financial aftermath have also made people more cautious about discretionary spending, affecting charities’ donation income.

The charity sector is facing a number of challenges, including declining income which by end of 2023/2024 is expected to fall in real-terms by £2.2bn according to think-tank, Pro Bono Economics. This is due to a number of factors, including:

  • The economic downturn:
    The economic downturn has led to a decline in donations and government funding. According to Charities Aid Foundation UK Giving Report 2023, the level of participation in charitable activities in 2022 was 84%. However, participation levels have not returned to pre-pandemic levels of 88% in 2019.

  • The rise of online giving:
    The rise of online giving has made it easier for people to donate to charities, but it has also led to a decline in donations to traditional charities. A study by the Charities Aid Foundation found that online giving accounted for 26% of all charitable donations in the UK in 2022.

  • The increasing cost of living:
    The increasing cost of living has made it harder for people to donate to charities. According to Charities Aid Foundation, across 2022, more than two thirds of people indicated they would need to cut spending to manage their bills. This includes 17% who said they would likely cut their charitable donations.

The Volunteer Dilemma: Recruitment and Retention

Alongside income challenges, charities also face issues concerning volunteer management. Volunteers are the backbone of many charities, and challenges in recruiting and retaining them can severely impact a charity’s operations.

Recruitment:
Charities often struggle to find volunteers with the required skills or time commitment. The recruitment process can be lengthy and expensive, adding to the operational strain on charities.

According to the Charity Aid Foundation UK Giving Report 2023. There has been a sustained reduction in volunteering levels. In 2022, an average of 7% reported volunteering for a charity. Whereas, pre-pandemic, this figure in 2019 was 9%.

The Community Life Survey 2021-2022 by the Department for Culture, Media and Support estimates that there are 4 million fewer people participating in regular formal volunteering than in 2019/20.

Retention:
Keeping volunteers engaged and motivated is equally challenging. Lack of career progression, inadequate support, or recognition can lead to volunteer fatigue, resulting in high turnover rates.

  1. The increasing demands on people’s time:
    People are increasingly busy with work, family, and other commitments, leaving less time to volunteer. According to a study by the National Council for Voluntary Organisations, the average person in the UK spends 16 hours per week on non-work activities.

  2. The lack of recognition for volunteering:
    Volunteering is often seen as unpaid work, which makes it less attractive to potential volunteers. One study showed that only 28% of people believe volunteering is valued by society.

Strategies for Overcoming These Challenges

Opportunities for charities

While these challenges are significant, they are not insurmountable. Here are some potential strategies for charities to consider:

Income Diversification:
Charities should seek to diversify their income sources to reduce vulnerability to fluctuations in any single income stream. This strategy might involve exploring corporate partnerships, earned income, grants, individual giving, and fundraising events. The advent of online crowdfunding campaigns can also help expand income sources.

Effective Communication and Transparency:
To stand out amidst the competition, charities must effectively communicate their mission, impact, and needs. A compelling narrative can capture potential donors’ attention and persuade them to contribute. Regular updates about fund usage can foster trust, encouraging repeat donations and volunteer commitment.

Strategic Volunteer Management:
It’s vital to have a comprehensive volunteer management strategy. This involves defining clear roles, ensuring adequate training is provided, and recognizing volunteers’ contributions regularly. By offering flexible volunteering opportunities, charities can also attract individuals who cannot make long-term commitments to their organisation.

You should also make it as easy as possible for people to volunteer and show them your appreciation. In order to do this, you might want to consider sending them thank-you notes, holding an event to thank them, or even offering a small reward, such as a gift card, as a way to show that they are valued by your organisation.

Embracing Digitalisation:
Digital platforms can be invaluable for income generation and volunteer recruitment. Charities can leverage online donation platforms, social media, and digital marketing techniques to broaden their reach, attract donations, and recruit volunteers.

Partnerships and Collaborations:
Collaborating with other charities can reduce competition, improve service delivery, and reduce costs. Shared fundraising events or joint marketing campaigns can mutually benefit participating charities.

Harnessing the Power of Data:
Charities can use data to drive decision-making, assess the effectiveness of their strategies, and tailor their fundraising appeals. Effective use of data can enhance donor engagement, improve volunteer management, and optimise resources.

Addressing the Challenges Head-On

Charities can counter the challenges of declining income and volunteer shortage by diversifying income streams, reducing costs, marketing their services effectively, and empowering volunteers through training and support. Furthermore, adopting a creative approach to fundraising and making it easy and rewarding for people to volunteer can significantly mitigate these challenges.

The UK charity sector faces considerable trials, but they also represent opportunities for adaptation, innovation, and growth. By understanding these challenges and implementing effective strategies, charities can ensure their resilience and continue to make a positive impact on society.

At AccountsPro, we understand the unique financial and operational challenges and complexities that charities face, which is why we partner with them to provide solutions that optimise efficiency and resources for our client base. Our dedicated team is committed to providing expert advice and guidance to charities, foundations and non-profit organisations.

One of the ways we help clients optimise their income is through providing outsourced finance solutions. We save our clients up to 80% of their overhead costs by outsourcing their finance department to us. If you would like to discuss this option, please contact us at: hello@accountspro.co.uk or visit this page to find out more about our financial outsourcing services.

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    Accounting Financial Outsourcing

    Strengthening the Financial Backbone of UK Charities, Foundations and NfPs through Outsourced Accounting Services

    In the UK, charities, trusts, foundations, family offices and not-for-profit organisations (NFPs) play a vital role in addressing a wide range of social, religious, environmental, and educational issues that impact communities and individuals. These organisations work tirelessly to provide support, raise awareness, and drive positive change, often filling gaps left by the government and private sectors.

    At AccountsPro, we take pride in working with a number of impactful organisations, providing outsourced accounting solutions and support that enable them to focus on their core missions while maintaining financial stability and regulatory compliance.

    In this article post, we will discuss how outsourced accounting solutions and support can help streamline the operations of UK charities, foundations, and NFPs.

     

    1. Charity Accounting: Ensuring Compliance and Transparency

    Charity accounting in the UK is subject to specific regulations, including compliance with the Charity Commission guidelines and SORP (Statement of Recommended Practice). An experienced charity accountant is essential to navigate these complex requirements while maintaining transparency for donors and stakeholders. Charity accountants can help organisations with:

    • Preparing annual accounts and trustees’ reports
    • Ensuring compliance with the UK’s legal and financial regulations
    • Implementing effective financial controls and risk management strategies
    • Providing financial advice and guidance on funding and grants

    A charity accountant can also help streamline financial management and enable organisations to focus on their core objectives. These solutions may include:

    • Cloud-based accounting software designed for charities
    • Integration with fundraising and donor management platforms
    • Automated expense management and budgeting tools
    • Bespoke financial reporting to support decision-making

     

    2. Charity Outsourcing: Accessing Expertise and Reducing Overhead Costs

    Many charities and NFPs operate with limited resources, making it challenging to maintain a full-fledged in-house finance team. Charity outsourcing enables these organisations to access specialised accounting expertise without the cost of employing full-time staff. By outsourcing their accounting functions, charities can benefit from increased efficiency, cost savings, and access to up-to-date knowledge of UK charity regulations and best practices. Outsourced accounting services can include:

    • Charity bookkeeping
    • Payroll management
    • VAT and tax compliance
    • Preparation and submission of statutory accounts

     

    3, Charity Bookkeeping: Ensuring Accurate and Timely Record-Keeping

    Accurate and timely charity bookkeeping is essential for tracking an organisation’s financial activities and ensuring compliance with UK reporting standards. By engaging an expert in charity bookkeeping, organisations can maintain meticulous financial records, simplify their audit process, and focus on their core mission. Additionally, efficient bookkeeping services can help charities identify cost-saving opportunities and improve their overall financial performance. Charity bookkeeping services can help organisations with:

    • Recording transactions and maintaining accurate financial records
    • Reconciling bank accounts and managing cash flow
    • Monitoring income and expenditure against budgets
    • Producing regular financial reports for trustees and management

     

    4. The Role of a Charity Finance Director: Providing Strategic Financial Leadership

    A charity finance director provides strategic financial leadership, helping organisations navigate complex regulatory requirements and make informed financial decisions. By engaging a finance director, charities and NFPs can benefit from expert guidance in areas such as financial planning, risk management, and long-term sustainability. The finance director plays a pivotal role in establishing a robust financial foundation, enabling organisations to fulfil their mission and expand their impact. Their responsibilities include:

    • Developing long-term financial plans and budgets
    • Overseeing financial risk management and compliance
    • Ensuring the organisation’s financial sustainability
    • Advising the board of trustees on financial matters and strategy

    For many charities, especially smaller organisations, the need for a full-time finance director may not be justified due to budget constraints or the scope of financial tasks involved. In such cases, fractional support from a finance director can be an ideal solution.

    Fractional support refers to engaging a finance director on a part-time or consultancy basis, providing the expertise and leadership required without the expense and commitment of a full-time hire. This arrangement enables charities to access the strategic financial guidance necessary for their operations while maintaining cost-efficiency.

    The benefits of fractional finance director support include:

    1. Cost Savings: Hiring a full-time finance director can be a significant financial burden for charities and NFPs. Fractional support offers a more cost-effective solution by providing the required expertise on an as-needed basis.
    2. Flexibility: With a fractional finance director, charities can scale up or down the level of support as their needs evolve, ensuring that they only pay for the services they require.
    3. Access to Expertise: Fractional support enables charities to tap into the knowledge and experience of seasoned finance professionals who can provide valuable insights and strategic guidance.
    4. Focused Support: A fractional finance director can concentrate on the organisation’s most pressing financial issues, offering targeted solutions and advice.

    Fractional support from a finance director offers charities and NFPs a cost-effective and flexible solution to access strategic financial leadership. By engaging a finance director on a part-time or consultancy basis, organisations can build a robust financial foundation that enables them to fulfil their mission and expand their impact while maintaining financial sustainability.

     

    In Summary:

    In today’s challenging economic climate, charities, foundations, and not-for-profit organisations face numerous obstacles, including reduced funding, increased competition for resources, and greater scrutiny from regulators and the public. In this environment, the need for efficient financial management has never been more critical. By opting to outsource accounting services, these organisations can achieve cost savings and enhance their financial stability.

    Outsourcing accounting functions is an effective strategy for many organisations, not just those grappling with limited resources. By engaging external experts, organisations gain access to professional accountants with in-depth knowledge of charity accounting, ensuring compliance and accurate financial reporting. This approach eliminates the need for a full-time, in-house finance team, reducing overheads while still providing access to the necessary financial expertise.

    Additionally, outsourcing enables charities to benefit from up-to-date knowledge of best practices and regulatory changes, without the cost and time investment required to maintain in-house expertise. This ensures that their financial management remains agile, adaptable, and compliant with the latest UK charity regulations.

    In the ever-evolving landscape of UK charity regulations and financial management, outsourcing accounting solutions is essential for charities, foundations, and not-for-profit organisations. By leveraging the expertise of charity accountants, outsourcing key financial functions, and engaging a finance director, these organisations can build a strong financial backbone, ensuring their long-term sustainability and ability to make a meaningful impact in a demanding economic climate.

    To find out more about our outsourced accounting and bookkeeping services for charities, please take a look at our page on financial outsourcing.

    To find our more about our general accounting services for charities, not-for-profits, trusts, foundations and family offices please read further here:

    For more information on our outsourced accounting services, please email Jonathan Levy at: jonathan.levy@accountspro.co.uk

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      Financial Outsourcing

      Financial Outsourcing for Charities and Not-for-Profit organisations

      Financial outsourcing for charities and not-for-profit organisations

      At AccountsPro we frequently speak with charity CEOs and Executive Directors who have already outsourced some of their day-to-day duties like graphic design, website development, marketing, and PR in order to maximize impact while delivering cost efficiencies.

      A significant number of these leaders are also looking to explore the possibility of outsourcing their finance function. Often this question comes at the cusp when an organisation is carrying out a wider review of the efficiency and effectiveness of their support functions.

      What’s driving this interest is largely to do with improvements in technology and the requirements of many charities to focus their resources on their frontline services and generally do ‘more for less’. There is also an increase in confidence and acceptance of remote working, which has, to some extent, quelled some of the scepticism around whether financial outsourcing can be a viable alternative to an in-house team.

      Financial outsourcing delivers numerous cost efficiencies, and also to allow for better and faster access to finance data for day-to-day decision making by leadership teams and trustees. Some of the most commonly outsourced functions include bookkeeping, management accounts, payroll, Charity Commission reporting, grant reporting, and board reports.

      In this article, we will explore the benefits of financial outsourcing in the charity sector. We will also provide guidance on when outsourcing should not be considered.

       

      What are the benefits of financial outsourcing for charities and not-for-profit organisations?

      Outsourcing, offers organisations the opportunity to ‘buy’ only the resources they need. This is particularly attractive for example in regard to payroll services, where organisations may have only a single employee who is able to run the monthly payroll. In most cases, outsourcing will reduce an organisation’s overhead costs. This is because multiple functions such as payroll can be run at a fraction of the cost of hiring a permanent onsite team.

      If we come back to our example of the employee who is responsible for running the monthly payroll. If there is no one else that can perform the function when he becomes ill, then this will reduce the continuity of service. This also leaves the organisation to be exposed to unnecessary risks and threats as a result of tasks such as payroll and other financial functions not being performed in a timely manner. By outsourcing these services, the contracting company can mitigate these risks and enable complete continuity of service.

      In recent years the charity sector has seen a backlash for the lack of transparency, particularly when it comes to submitting annual audits and accounts. With charity pressures growing, CEOs and trustees are turning to outsourcing as a way to improve the quality and reliability of their accounts. From our own experiences, having a fresh pair of eyes that is looking at the organisation from the outside is both hugely valuable and beneficial. This is especially true for firms that are looking to increase their transparency and accountability to donors and service users of the charity.

      Another interesting benefit that comes out from financial outsourcing, is that you will often have a outsource team that have a much broader range of specialist knowledge, experiences and skill sets which can be utilised when needed. For example, when one of our clients needed a specialist who was familiar with the South African tax system. The support they needed was provided by a team member they already worked with, in a related but different capacity.

      Outsourcing also helps charities to better utilise their internal staff and increase targeted efforts. By contracting out tasks such as bookkeeping and other financial administration, charities can free up the time of internal staff. This allows them to focus on work that better meets the aims and objectives of the organisation and in turn can work to increase in levels of staff retention. When staff are hampered with tasks, particularly finance tasks which are not core to their role, this is often a reason why someone will start to look elsewhere for an opportunity that is more fulfilling to the core of what they do.

      Technology advancements have made outsourcing a more efficient process, allowing secure uploading of documents and data to a secure portal. We have also seen advancements in Optical Character Recognition software that converts invoices into accounting data; and dynamic management reporting that can be structured to the requirements of CEO, senior management and trustees. Both accessibility and portability to data is no longer a stumbling block to financial outsourcing as it once was.

       

      When Outsourcing Should Not Be Considered

      It should be noted that financial outsourcing is not a one-size-fits-all solution, and it is not necessarily the most effective option for every organisation. The pros and cons of outsourcing should be weighed up by charities, and they must also ensure that outsourcing aligns with their core mission and values. It is also imperative that the charity chooses an outsourcing partner that is reputable and reliable. This will ensure that the charity’s financial management is in the most capable of hands.

      When it comes to outsourcing, charities should be aware that if it is not managed properly, it can lead to a loss of control over the process. In this regard, it is essential to set up an effective procedure for outsourcing management from the onset of a contract. This will ensure that control over the contract is maintained.

      Charities should also consider the importance of maintaining strong relationships with their donors and stakeholders. If outsourcing may have an impact on these relationships, charities should think twice before proceeding. Finally, outsourcing should not be used as a way to avoid dealing with internal issues. Organisations should address internal problems and create a culture of accountability before considering outsourcing as a solution.

       

      Conclusion

      Overall, outsourcing can offer many benefits to charities, including cost savings, access to specialist skills, better risk management, and improved transparency and accountability. With the right approach, outsourcing can help charities achieve their mission more efficiently and effectively which enables them to provide better services to their beneficiaries.

      We would be more than happy to provide you with further information in relation to our financial outsourcing services for charities, so please feel free to get in touch with us at: hello@accountspro.co.uk or via our contact page:- https://accountspro.co.uk/contact-us/

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