Craig Naylor-Smith, managing director of leading multichannel service provider, Parseq, explores how the last twelve months have impacted upon the third sector, its increased need for finance and accounting (F&A) support from outsource providers and just why expertise and cost efficiency aren’t the only factors taken into consideration during the tendering process anymore.
It’s fair to say the third sector has had a turbulent couple of years. In the last twelve months alone there has been a sea change in how charities operate including a re-evaluation of not only their fundraising processes, but they’ve also had to seriously consider the partnerships they form with outsourcers and how these relationships can ensure that every £1 donated works harder for the good causes they support.
Back in 2010 the third sector hit a huge bump in the road. According to Charity Market Monitor (2010) the UK’s top 500 charities lost £64 million in donations. Thankfully the latest figures suggest that donations are once again on the rise, but the situation the charity sector found itself in five years ago has had a knock on affect that can be still felt today.
Charities began to look at how they processes their funds differently and more importantly, more efficiently. As a consequence interest began to rise in the benefits of F&A outsourced services. A move which was further compounded by cuts to Government grant funding.
To put this into context, in the last year alone our business has tripled the number of charitable clients on our books and what’s more, projections show continued growth into next year and beyond.
And when you consider the figures, it’s a pretty savvy move by charities. Research indicates that the third sector could save £136 million a year[i] in back office costs. In fact, we estimate that each organisation could confidently make a 30 per cent cost reduction if they switched from an in-house to outsourced function.[ii]
But you would be wrong to think that cost saving is the only consideration for charities when making the move to outsourcing F&A.
Charities need to have the same reassurance as any other business does when they decide to put part of their operation in the hands of a third party and this is often underestimated.
One of the most important things to charities is reliability. It may sound a bit dull, but it’s true. They want a stable outsource partner who can not only understand their specific needs, but be able to cope with them.
This includes having the commercial capability and scale to cope with the peaks and troughs of activity required by charities, and ensuring correct and suitable protocols are in place, such as contingency planning to deliver on service agreements.
Physical security is also a real concern. Many charities fear that third party providers would not be able to offer the same level of security they could to manage sensitive material. This simply isn’t true. A reputable provider will always be able to demonstrate their security measures and also be able to prove their credibility through sector specific regulation and licencing. If they can’t it isn’t the issue of outsourcing at fault, instead it’s the provider not understanding the specific needs of their clients.
Expertise is, of course, also key. Charities need partners who fully understand their specific requirements and what’s more not simply be reactive, but also to be proactive in response to the constantly changing climate of fundraising.
To demonstrate our understanding of the sector we’ve rolled out a new back office platform, which has been designed and created in-house following more than a year of investment and testing as a bespoke charity offering. So far the response from our third sector client base has surpassed all expectations – which is not only testament to the business’ understanding of how charities think and operate, but it’s also a really proud moment for all the team.
It’s a mistake to think that charities should behave like every other organisation – they don’t – in fact rarely do you get sectors that do. Instead of offering off the peg solutions the thing that really impresses charities is that we understand them, we react to current needs and predict future needs.
Charities were once cautious of partnering with specialist providers. They worried that it was a risk or that their missions would be diluted. Instead what they’ve found is that the right partnership can be a huge support, not only from a monetary point of view but also as they get the opportunity to tap into even more sector experience, new technology and people with passion.
i The Centre of Charitable Giving and Philanthropy Research, report 2009
ii Parseq, 2015