Did the Covid crisis expose the weakness of your charity’s finance systems?

WHEN Covid plunged the world into crisis in 2020, a lot of charities suddenly discovered the limitations of their finance and workflow systems.

For many, the immediate problem was that staff could not easily shift to home working. 

But even if that challenge could be overcome, a lot of non-profits found their systems could not produce accurate, up-to-date financial information when it was urgently needed to inform critical decisions.

Every organisation hopes not to face a shock on that scale again soon, but many non-profits still need to address the weaknesses exposed in 2020.

iplicit’s whitepaper Changing Your Finance System: A Toolkit for Nonprofits draws on the wisdom of charity finance expert Mark Salway. It contains advice on finding systems that produce good quality data that don’t bog down the finance team in time-consuming labour. 

The work of a charity’s finance team can be split into five levels:

• Financial governance: The oversight by trustees and managers.
• Financial strategy: The setting of the organisation’s direction by modelling scenarios and business models.
• Reporting and management information: The production of timely and relevant data formatted to the needs of different users.
• Control environment: The systems that make sure assets are not at risk from error or fraud.
• Transaction programming: All the basic work of the department, which should be made as simple and efficient as possible.

If your team is spending too much time at the bottom levels, it’s a sign that the system is not working well for you.

To begin the hunt for new software, it’s helpful to start with a ‘gap analysis’. That means working out where your finance department is now, where you want it to be – and the differences between those scenarios.

Analyse each key process in the finance function and ask: what works well and what could be improved? That applies to people, processes and technology.

You should also get clear about what you require from a new system. Make sure you document those requirements and rank the importance of each, so you can ask vendors to demonstrate how their systems will meet your needs.

Ask yourself what kind of analysis and reporting you will need from the new system. When vendors demonstrate their software, ask whether you’ll be able to ‘slice and dice’ information, analyse projects in different ways and create the reports you need. 

You need to involve a broad group of stakeholders in this process, including trustees, managers, fundraising, operations and support as well as finance. The process will go better if they are fully involved and understand the need for change.

With the right software provider, those same stakeholders will be able to help shape your new system.

The process does not stop on the ‘go live’ date for new software. Rather than creating an improved version of what they had before, the best-performing non-profits will keep pushing and improving until their finance system is fulfilling its potential to transform the organisation.

For more guidance, download a copy of iplicit’s guide Changing Your Finance System: A Toolkit for Nonprofits, published in association with Mark Salway.